final study on poultry catastrophic disease - … their risk management relies on geographic...
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Final Study for the Study on Poultry Catastrophic Disease
Final Study on Poultry Catastrophic Disease
Deliverable 2: Final Study
Order Number: D15PD00012
Submitted to:
USDA-RMA
COTR: Jaime Padget
6501 Beacon Drive
Kansas City, Missouri 64133-6205
Submitted by:
Watts and Associates, Inc.
4331 Hillcrest Road
Billings, Montana59101
Delivery Date: September 30, 2015
This document includes data that shall not be disclosed outside of the Government and shall not be duplicated, used,
or disclosed, in whole or in part, for any purpose. The Government shall have the right to duplicate, use, or disclose
the data to the extent provided in Order No. D15PD00012. All pages of this document are subject to this restriction.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
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Table of Contents
Section I. Executive Summary ........................................................................................................ 1 Section II. Sector Descriptions ....................................................................................................... 5
II.A. Broiler Sector ..................................................................................................................... 6
II.B. Turkey Sector ................................................................................................................... 12 II.C. Layer Sector ...................................................................................................................... 20 II.D. Game Birds ....................................................................................................................... 31
Section III. Stakeholder Input ....................................................................................................... 34 Section IV. Existing Program Review .......................................................................................... 46
Section V. Data Availability and Applicability Assessment ........................................................ 58
Section VI. Pricing Methodologies Investigations ....................................................................... 69
VI.A. Broiler Sector .................................................................................................................. 69 VI.B. Turkey Sector .................................................................................................................. 70 VI.C. Layer Sector .................................................................................................................... 71 VI.D. Game Bird Sector............................................................................................................ 75
Section VII. Risk Assessments ..................................................................................................... 76 VII.A. Broiler Sector................................................................................................................. 76
VII.B. Turkey Sector................................................................................................................. 82 VII.C. Layer Sector ................................................................................................................... 86 VII.D. Game Bird Sector .......................................................................................................... 91
Section VIII. Research Findings ................................................................................................... 95
Section IX. Summary of Feasibility Assessment ........................................................................ 104
List of Tables
Table 1. Top Broiler Integrators, United States, 2013 .................................................................... 7 Table 2. Economic Indicators–Broiler, United States .................................................................. 10
Table 3. Broiler Production by States, 20141 ................................................................................ 11
Table 4. Top U.S. Turkey Processors in 2014 .............................................................................. 17 Table 5. Geographic Distribution of 2014 Turkey Production in the United States..................... 18
Table 6. Economic Indicators – Turkeys, United States ............................................................... 19 Table 7. 2014 United States Egg Production by State .................................................................. 24
Table 8. Economic Indicators – Layer Segment United States .................................................... 27 Table 9. Top Ten Egg Production Companies: 2013 ................................................................... 28 Table 10. Top Ten States (in order of Value Sold): Number of Farms Reporting Layers
2012 Census of Agriculture .......................................................................................... 29
Table 11. Game Birds Reported in 2012 Census of Agriculture by Inventory............................. 33 Table 12. Important Diseases by Poultry Industry Sector ............................................................ 59 Table 13. Census of Agriculture Poultry Species for which Data are Collected and Reported ... 60 Table 14. Sample Census of Agriculture Arkansas State-level Annual Sales:
Chickens by Operation Size ......................................................................................... 61
Table 15. Sample Census of Agriculture California County-level Single Period Inventory:
December Chukar Inventory ........................................................................................ 61
Table 16. Sample of NASS Reported Condemnation Data: Chicken Condemnations
Due to Diseases in 2014 by Number of Head .............................................................. 62 Table 17. APHIS Report on the Status of OEI Reportable Diseases in the
United States in 2012 ................................................................................................... 64
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Table 18. NASS Reported Condemnations of Chickens Due to Diseases in 2014 ...................... 65 Table 19. Poultry Diseases with NPIP Protocols for Response .................................................... 65 Table 20. Poultry Diseases Topics Addressed in the 2004 Report of the Committee on
Transmissible Diseases of Poultry and Other Avian Species - USAHA ..................... 66
Table 21. Poultry Diseases Topics Addressed in the 2014 Report of the Committee on
Transmissible Diseases of Poultry and Other Avian Species - USAHA ..................... 66 Table 22. Poultry Yearbook Egg Prices 1955 to 2004 .................................................................. 74 Table 23. Prices Received 1996 to 2014 ....................................................................................... 74 Table 24. Broiler Catastrophic Disease List: Available Vaccinations and
NPIP Protocol Inclusion ............................................................................................... 80
Table 25. Turkey Catastrophic Disease List: Available Vaccinations and
NPIP Protocol Inclusion ............................................................................................... 85 Table 26. Layer Catastrophic Disease List: Available Vaccinations and
NPIP Protocol Inclusion ............................................................................................... 88 Table 27. Waterfowl Catastrophic Disease List: Available Vaccinations and
NPIP Protocol Inclusion ............................................................................................... 92 Table 28. Game Bird Catastrophic Disease List: Available Vaccinations and
NPIP Protocol Inclusion ............................................................................................... 93 Table 29. Ready-to-Cook Poultry - A Quality Summary of Specifications for Standards of
Quality for Individual Carcasses and Parts .................................................................. 97
Table 30. Summary of U.S. Standards for Quality of Individual Shell Eggs ............................... 99
List of Appendices
Appendix A. Poultry Grower Contracts
Appendix B. Stakeholder Input
Exhibit 1. Listening Session Agenda
Exhibit 2. Sample Listening Session Press Release
Appendix C. State Veterinarians
Appendix D. APHIS Stakeholder Registry Reports
List of Attachments
Attachment I. Poultry-Grading Manual
Attachment II. United States Classes, Standards, and Grades for Poultry AMS 70.200 et seq.
Attachment III. Egg-Grading Manual
Attachment IV. United States Standards, Grades, and Weight Classes for Shell Eggs AMS 56
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SECTION I. EXECUTIVE SUMMARY
The Statement of Work (SOW) for Order Number D15PD00012 identifies the objectives of the
project as “…to obtain information and to determine if providing poultry catastrophic disease
coverage would benefit agricultural producers; to help poultry producers and Congress
understand how these risks are being, or could be addressed by the crop insurance system; to
find and evaluate any existing policies or plans of insurance that provide coverage for any and
all poultry catastrophic disease events; and, to determine what practical challenges are present
that need to be overcome in order to create actuarially sound products related to a poultry
catastrophic disease event.”1
The sheer size and complexity of the commercial poultry industry are two of its defining
features. The industry produces meat and eggs from numerous species as well as live birds.
Each of these sectors has different characteristics. For the egg sector, the birds are a capital
resource rather than a crop, although there are some analogies to a wheat plant being the capital
resource that produces the grain crop. Table and breaking eggs are used as a food, while
hatching eggs are used to produce laying hens and meat birds. Game bird hatching eggs are used
to produce game birds for meat as well as live game birds for release. The production cycle for
eggs can last a year or more, while the production cycle for meat and live birds is much shorter.
For broilers, live chicks and poults, a production cycle may be completed in a matter of weeks.
Much of the poultry meat industry is vertically integrated. Integrators typically control feed
production, grow-out, transportation, slaughter, processing, and wholesale distribution and may
control brood egg production and hatching. Production facilities and services are provided by
contracted growers whose compensation depends on meeting objectives such as growth rates,
disease control, feed efficiency, etc. The major sector stakeholders, the integrators, consequently
have remarkable control of their products and vast market power relative to contract growers.
There are many fewer contract growers in the layer sector than in the meat sectors. Nonetheless,
many of the producers in the layer sector are also vertically integrated.
Large integrators generally indicated their preferred risk management for disease does not
involve catastrophic disease loss insurance. Instead, their risk management relies on geographic
isolation of production and strict biosecurity measures required of growers. On the other hand,
the low margins for growers and the limited options for alternative uses of their facilities create a
situation where downtime following a disease event is a major concern. Yet the appropriate
response to a catastrophic disease event is to mandate a longer downtime before introducing a
healthy flock. If a United States Department of Agriculture (USDA) Risk Management Agency
(RMA) policy were to be offered to growers to address their greatest risk management concerns,
changes in the Act would be required to establish indisputably a grower’s insurable interest not
only due to loss of a “crop” but also due to the inability to use their production facilities. While
this is somewhat analogous to prevented planting coverage offered for field and row crops, it
differs in the respect that the period of loss is not a crop year but rather one or more production
cycles. Insurance coverage addressing such an extended period of loss is allowed under
Subsection 508(l)2 for trees including losses due to disease and partial indemnification
1 USDA, RMA, 2014, SOW, Order Number D15PD00012, page 19. 2 Optional Coverage under the Crop Insurance section (7 U.S.C. 1508) of 75-30 - Agricultural Adjustment Act of 1938 &
Federal Crop Insurance Act as amended through P.L. 113–79, Enacted February 7, 2014.
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addressing such an extended period of loss for trees is offered under Section 531(f).3
Nonetheless, for contract growers of poultry, the ownership of the crop most often resides with
the integrator and therefore the issue of insurable interest in the foregone productive value of
their facilities remains even if the long-term losses due to destruction of the capital asset can be
addressed.
A small cohort of traditional producers of poultry exists, especially in the layer sector and in
niche markets for meat and live birds. These include producers of “free range” poultry and
poultry raised for ethnic markets. The strongest interest for disease insurance among owners of
poultry is in this group, although here too the most substantial interest was for managing risk due
to the downtime following a disease outbreak.
As this report neared completion, the Contractor identified an offer of insurance for business
interruptions resulting from depopulations due to Highly Pathogenic (HP) Avian Influenza (AI).
This offer appears to be underwritten by an international consortium and is available as a
standard policy and on a surplus line basis. Although the Contractor examined policy materials,
the examination was constrained by a confidentiality agreement. However, the Contractor is
permitted to indicate business interruption coverage is offered following depopulation due to a
government action resulting from a verified HPAI infection. Fixed costs identified in the policy,
as well as continuing expenses and lost profits are indemnifiable until either the end of the
insurance period or the release of the facility for repopulation. Coverage is available for both the
poultry meat and layer sectors.4 The reader should note, the Federal Crop Insurance Act requires
that “no program may be undertaken [by the Federal Crop Insurance Corporation] if insurance
for the specific risk involved is generally available from private companies.”5
Poultry industry data, including estimates derived by the USDA National Agricultural Statistics
Service (NASS) from surveys, are available for the larger sectors of the industry: chickens
(including layers and the eggs they produce), ducks, and turkeys. Production data on other
sectors of the poultry industry are geographically limited, sporadic, and in many cases anecdotal.
The proprietary nature of poultry industry data and contracts has made it particularly difficult to
obtain farm-level data. Such data is important for development of an actuarially-sound crop
insurance product.
Two commercial services provide price data on poultry for a fee. These price data focus on
wholesale and retail markets rather than on farm-level sales. NASS and the USDA Economic
Research Service (ERS) estimate “prices received” values for poultry based on live-weight-
equivalent prices calculated by subtracting processing costs from ready-to-cook wholesale prices
and multiplying that result by the dressing percentage.6
3 Supplemental Agricultural Disaster Assistance section (7 U.S.C. 1508).of 75-30 - Agricultural Adjustment Act of 1938 &
Federal Crop Insurance Act as amended through P.L. 113–79, Enacted February 7, 2014. 4 J.D. Goff, Vice President, National Accounts Underwriting, James Allen Insurance; personal communication, July and August
2015; B. Satterfield, Executive Director, Delmarva Poultry Industry, Inc., personal communication, August 2015. 5 Federal Crop Insurance Act, 7 U.S.C. 1508(l). 6 USDA, ERS, LDPM: Livestock, Dairy, and Poultry Outlook Catalog, http://www.ers.usda.gov/publications/ldpm-livestock,-
dairy,-and-poultry-outlook.aspx, Livestock, Dairy, and Poultry Outlook, June 16, 2015, “U.S. red meat and poultry forecasts”
table, http://usda.mannlib.cornell.edu/usda/current/LDP-M/LDP-M-06-16-2015.pdf, accessed July 2015.
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Over the course of 6 on-site and 4 telephone listening sessions, the Contractor gathered feedback
from more than 120 stakeholders. While there were several common themes in the stakeholder
feedback, there were differences in emphasis regionally and by sector. Representatives from
major integrators, the owners of a majority of the birds producing meat, indicated no interest in
catastrophic disease insurance. They noted widespread disease outbreaks have the potential to
increase their profits as prices rise. Even when diseases affect their own production, the size and
internal diversification of the larger integrators limits the potential “catastrophic” impact because
a single affected flock represents a small percentage of the total birds in production. However,
this attitude is not reflected by contract growers. These growers frequently have heavily
leveraged operations and a disease outbreak that results in the loss of even a single production
cycle can cause bankruptcy. While a majority of listening session attendees who spoke
expressed concerns related to diseases, many growers expressed the opinion that most of this risk
could be controlled by proper biosecurity. However, recent losses in the Midwest suggest that
current biosecurity protocols may not be sufficient to avoid losses.
The USDA Animal and Plant Health Inspection Service (APHIS) offers programs providing
indemnities to poultry producers and integrators who incur disease losses resulting from
depopulation. APHIS determines the net present value for commercial birds which have been
“taken” as a part of a disease management program. The APHIS values for meat and live birds
for release are generally based on the price of day-old birds offered by mail order hatcheries plus
an estimated cost of feeding the birds from birth to the age attained at the time of depopulation.
APHIS considers market pricing for marketable birds, the productive potential of layers, and the
value of the intellectual property rights in breeding stock, when appropriate. Consequently,
APHIS valuations are on a one-off basis. Furthermore, the percentage of the value of the taken
poultry paid by APHIS is not always perceived as consistent by the industry. Since the
integrators generally own the birds APHIS indemnities are not always distributed between
integrators and contract growers, although growers have received some share of APHIS
payments for some depopulations.
Private insurance has been offered by the Catlin Group (Bermuda) and Lloyd’s (London) on a
surplus line basis for coverage for all mortality risks of livestock, including disease and down
time. The premiums for such insurance are high. Furthermore, after the recent outbreak of
HPAI, offers for mortality insurance and business interruption with disease listed as an insurable
cause of loss have been withdrawn.
The Contractor considered alternate insurance designs to address widespread disease events in
poultry. None of these alternative designs met all the RMA insurance development feasibility
criteria. The most substantial barriers were imposed by the Crop Insurance Act, RMA’s enabling
legislation. The Crop Insurance Act has been interpreted to preclude provision of insurance for
rent and labor payments to growers because the authority for indemnities is limited to “… losses
of the insured commodity…”7
Due to the sporadic and catastrophic nature of the proposed causes of loss, traditional
quantitative rating approaches would be difficult to implement and most likely rates would need
to be established for broad geographic regions. The biggest potential customers for catastrophic
7 Federal Crop Insurance Act, 7 U.S.C. 1508(a)(1).
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disease insurance, the large integrators, are generally satisfied with their non-insurance risk
management strategies. It is smaller producers who would be most likely to purchase the
insurance. Consequently, the distribution of the insurance liability is unlikely to mirror the
distribution of poultry throughout the country. Underwriting or policy language to address the
short production cycle will be required to avoid adverse selection. While pricing meat birds will
be relatively straight-forward, establishing a value for breeders, layers, and pullets will introduce
complications in establishing the insurance pricing. These confounding factors and the very thin
margins for the on-farm component of the poultry income stream means the cost of insurance
may create opportunities for movement in the supply curve, at least regionally if not nationally.
From RMA’s perspective, there are the fundamental questions regarding the insurability of the
grower’s interest, and non-trivial questions regarding identification, measurement, and tracking
of the value of a livestock “crop.” Moreover, the proprietary and closely guarded nature of
production data makes the prospect for development of meaningful premium rates without a
significant uncertainty load questionable. Furthermore, the existing reinsurance agreements with
Approved Insurance Providers (AIPs) are likely not appropriate, barring meaningful adjustments,
for livestock mortality products. In light of the many issues identified in this study, including the
failure of insurance approaches for the poultry industry to meet some of the RMA criteria of
feasibility, the Contractor believes it is currently not feasible to develop catastrophic disease
insurance for the poultry industry without substantive changes in the current crop insurance
paradigm. Any development effort to address catastrophic disease coverage would have to be
very large in scope and include broad authority to request formal USDA counsel positions
regarding legal authority for coverage so policy language could be appropriately structured;
recommend potential changes to federal reinsurance agreements; utilize potentially alternative
quantitative and qualitative data methods in ratemaking; require unique underwriting standards
based on biosecurity practices; and operate under an indefinite and likely extended timeline to
accommodate structural changes that would be appropriate to support the approval and
implementation of the potential product.
Final Study for the Study on Poultry Catastrophic Disease
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SECTION II. SECTOR DESCRIPTIONS
The Statement of Work (SOW) for Order Number D15PD00012 identifies the objectives of the
project as “…to obtain information and to determine if providing poultry catastrophic disease
coverage would benefit agricultural producers; to help poultry producers and Congress
understand how these risks are being, or could be addressed by the crop insurance system; to
find and evaluate any existing policies or plans of insurance that provide coverage for any and
all poultry catastrophic disease events; and, to determine what practical challenges are present
that need to be overcome in order to create actuarially sound products related to a poultry
catastrophic disease event.”8 This document is the Final Study required by that SOW.
The U.S. commercial poultry industry includes production of more than 15 species of
domesticated fowl and commercial game-birds, production of eggs from these species for
hatching, and production of eggs from a limited number of these species for direct consumption
by humans. Commercial poultry species endemic to the United States and raised for meat
include geese and turkeys, as well as several species of ducks, pheasant and quail.9 Chickens,
emu, guinea hens, ostrich, and additional species of duck, pheasant, and quail were introduced
and are now grown commercially in the United States. Since disease can be transmitted from
wild populations to commercial flocks and susceptibility to disease may be influenced by the
bird’s origins, differences among the species grown commercially, including differences between
endemic and introduced species, may impact the risks to the commercial flocks.
Production of all poultry and eggs comprises approximately $43 billion of the U.S. agricultural
economy.10
The financial impact of the three major commercial poultry sectors (broilers, layers,
and turkeys) collectively in the U.S. agricultural economy is comparable to the financial impact
of soybeans. There is also a large processing added-value component in all poultry sectors. This
increases the impact of the poultry industry on the overall U.S. economy. Furthermore, although
feed costs and costs for transporting feed have led to some concentration of poultry production in
the states producing the feed crops, additional production occurs near population centers. This
bifurcation of production locales has contributed to the geographic balance in the poultry sector
and in the overall U.S. agricultural economy.
To provide clarity, the Contractor defines below the terms poultry producer, grower, and
integrator as they are used in this report.
Poultry Producer: A person owning poultry and growing poultry or eggs for sale into
markets for human consumption.
Grower: A person retained under contract by the owner of poultry or an agent of that
owner to manage the growth of poultry for delivery of mature birds or eggs to the owner.
Integrator: A person who owns poultry being grown for sale into markets for human
consumption as well as associated enterprises to provide inputs, services, or processing of
the eggs or poultry.
8 USDA, RMA, 2014, SOW, Order Number D15PD00012, page 19. 9 Some classification systems include turkeys as members of the pheasant family. 10 USDA, NASS, 2012 Census of Agriculture, Table 2,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_002_002.pdf, accessed April
2015.
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Much of the poultry industry is vertically integrated. A small number of very large firms have
“integrated” many elements of production, marketing, and sales. Integrators for poultry meat
production may control feed production, brood egg production, hatching, grow-out,
transportation, slaughter, initial processing (preparation of a marketable whole bird), further
processing to retail products such as lunch meat, and wholesale distribution. Although
integrators play a smaller role in egg production, they may control feed production, layer
hatching and grow-out, transportation, processing, and wholesale distribution. Furthermore, this
same level of integration characterizes many egg producers, including most of the larger
producers. Consequently, the major sector stakeholders have a tremendous amount of control of
their products and vast market power relative to their contract growers. Even relatively small
egg and poultry producers/integrators may own and manage many aspects of their businesses
(e.g., rearing of birds, feeding, housing, husbandry, and marketing of their product) and are
capable of managing many elements of the process.
II.A. Broiler Sector
The term ‘broiler’ is the poultry industry name for a young chicken raised for meat. With the
value of broiler production in 2014 totaling almost $33 billion,11
broilers account for about two
thirds of the farm-level value of production and sales of poultry products in the United States.7,12
The broiler sector is dominated by vertically-integrated agribusiness firms. People in the
industry refer to these firms as either broiler companies or integrators. In the government
literature they are occasionally called “dealers” or “contractors.” In 2013, 15 vertically
integrated firms controlled almost 90 percent of U.S. broiler production (Table 1).13
Consolidation in the industry has resulted in “…significant structural change in recent
decades…the industry has evolved to a structure including vertical integrators that contract with
producers to raise their animals under strict specifications.” Under this integrated structure,
“Vertically integrated companies in a supply chain are united through a common owner. Usually
each member of the supply chain produces a different product or service, and the products
combine to satisfy a common need…”14
To avoid confusion in the discussions in this report, the
Contractor will avoid using the term “producer,” except in those cases where the definition
provided earlier specifically applies, and will generally refer to either integrators or contract
growers.
11 USDA, NASS, 2014, Poultry Production and Value, 2014 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-30-2015.pdf, accessed November 2014. 12 The Poultry Site, Poultry News, “Value of US Poultry Production Has Doubled in 14 Years”,
http://www.thepoultrysite.com/poultrynews/33264/value-of-us-poultry-production-has-doubled-in-14-years, accessed
December 2014. 13 WATT Poultry USA, 2014, 2013 Top Broiler Producing Companies,
http://www.wattagnet.com/Worldtoppoultry/US_broiler_producers.html, accessed November 2014. 14 National Chicken Council, Vertical Integration, http://www.nationalchickencouncil.org/industry-issues/vertical-integration/,
accessed July 2015.
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Table 1. Top Broiler Integrators, United States, 2013 Integrator Percent of Market
Tyson Foods 25.3%
Pilgrim’s Pride 17.5%
Perdue Farms 7.6%
Koch Foods 7.3%
Sanderson Farms 5.3%
Wayne Farms 3.9%
Mountaire Farms 3.8%
Foster Farms 3.4%
George's 3.4%
Peco Farms 2.3%
Keystone Farms 2.2%
Simmons Foods 2.2%
House of Raeford Farms 2.1%
O.K. Foods 1.8%
Fieldale Farms 1.8%
Source: After WATT Poultry USA, 2014, 2013 Top Broiler Producing
Companies, http://www.wattagnet.com/Worldtoppoultry/US_broiler_producers.htm
l, accessed November 2014. The Contractor converted weekly
numbers in that report to annual processed numbers.
II.A.1. The Crop
Modern commercial broilers, typically known as Cornish crosses or Cornish-Rocks, are specially
bred for large-scale, efficient meat production and grow much faster than egg or traditional dual-
purpose breeds. Modern commercial broilers are noted for having very fast growth rates, a high
feed conversion ratio, and low levels of activity. Broilers often reach a harvest weight of four to
five dressed pounds in only eight weeks. Commercial broilers have white feathers and yellowish
skin. These birds also lack the typical “hair”15
characterizing many breeds that requires singeing
after plucking. Both male and female broilers are slaughtered for their meat. The genetic lines
for most broilers produced in the United States are managed by three companies: Aviagen Inc.,
Hubbard LLC (Americas), and Avian Technology Intl LLC.16
These companies also have
substantial international sales of chicks and parent stock (e.g., Aviagen reports sales in 130
countries).
Growers own the broiler houses, provide labor, and generally have the responsibility to manage
biosecurity, house preparations, and litter. The vast majority of broiler production operations are
managed under a contractual structure that dictates both the manner in which the enterprise is
managed and how returns are distributed. The impact of these contracts on grower enterprises is
the central focus of literature regarding risk management in the poultry industry.
At the outset, it is important to clarify that farm-level broiler prices, receipts, and values reported
by various agencies, including NASS, are calculated or estimated values. They are not the
values received by broiler growers which are dictated by the contractual agreement entered into
between the grower and integrator. The published “prices received” values are live-weight-
equivalent prices calculated by subtracting processing costs from ready-to-cook wholesale prices
15 A filoplumes consists primarily of the rachis, the main shaft of a feather. In some breeds filoplumes lie under the contour
(surface) feathers providing support. 16 WattAgNet, 2014, Who’s Who.
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and multiplying that result by the dressing percentage. These values are useful only as industry-
wide indicators of the relative price trends. While this report includes these values to a limited
extent, the more important descriptive data are the number of broilers produced, the pounds of
broiler meat produced, the number of broiler houses, and the relative impact of a catastrophic
disease. The revenue growers actually receive is a contracted payment for capital and labor
services rendered. Payment is based on pounds of bird delivered multiplied by the contract
price, which is derived from a two-part, piece-rate tournament scheme, i.e., a base rate plus an
incentive determined by the grower’s performance relative to others in the tournament.
Enterprise Structure
An analysis of broiler operations reported by the ERS in 2014 provides the best snapshot of
broiler production.17
Grower contracts dominate the industry, with only about 0.4 percent of
birds produced by independent poultry producers and 0.3 percent produced on integrator-
operated farms. Few details about the contracts themselves are available. In spite of recent legal
and legislative actions freeing growers to share information about their contracts, and in spite of
repeated requests for redacted copies of contracts from growers, integrators, and crop experts, the
Contractor obtained only two contracts (Appendix A). ERS reports that almost 94 percent of the
contracts contain performance-based payment incentives; however, most of these broiler
contracts have tournament or similar competitor-comparison-based incentive payments. The
contracts obtained by the Contractor contain language providing the grower with performance-
based incentives coupled with tournament-based performance payments. Under the tournament
system, the integrator sets an average price for raising the chickens (e.g., 5 cents per pound live
weight). The growers are ranked. The top-ranking growers can be paid a premium of up to 25
percent. Since the contract price is a tournament average, the poorest performing growers will
receive less than the average. The grower’s ranking is largely based on feed conversion rates:
how much weight the broilers gained compared to how much feed the birds have consumed.
ERS reported that in 2010, less than one fifth of contracts made provisions for catastrophic risk
payments from the integrator to the grower.18
Both of the contracts reviewed by the Contractor
have catastrophic risk payment clauses. Based on the underlying cause of the loss, the integrator
provided some compensation to the grower in the event of a catastrophic event. It should be
noted, one contract obtained by the Contractor did include compensation for losses due to
uncontrollable disease.
The turnover in farms producing broilers is relatively low. About one third of all broiler
operations have been in business for at least 20 years. These older operations tend to be smaller
and to have lower levels of technology. Only 4.5 percent of farms (6.6 percent of production by
weight) produced broilers for 5 years or less. These newer operations have houses that are 11
years old on average. This suggests many new growers are operating on farms that had
previously been operated by others or that economic restructuring of older operations resulted in
their listing as having been in operation for 5 years or less. Just under half of the new operations
had new houses. Newer operations tend to incorporate a larger number of houses. New
17 MacDonald, J.M., USDA, ERS, 2014, Technology, Organization, and Financial Performance in U.S. Broiler Production,
Economic Information Bulletin No. 126. http://www.ers.usda.gov/media/1487788/eib126.pdf, accessed December 2014. 18 Ibid.
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operations with new houses also tend to carry a higher debt load compared to new operations
using older houses.19
Since newer operations tend to be larger, they also tend to have more substantial investment in
housing and technology. These newer operations are more reliant on income from the poultry
operations rather than from a range of “crops” and more sensitive to changes in energy price and
contract settlement terms. New large operations typically receive longer term contracts.20
Furthermore, in at least one of the contracts reviewed by the Contractor, the integrator offered a
minimum guaranteed payment for new house construction based on dollars per 1,000 birds
placed and the type of the new construction.
Though commercial broiler farms have seen a modest increase in average size since the 2010
poultry report, the “contract poultry growers are relatively small and specialized farms.”21
From
a production perspective, the Southeast and Mid-South offer comparative advantages of climate,
land prices, cost of implementing required environmental policies, and lack of alternative uses
for the land. Poultry is susceptible to extreme weather conditions and requires access to ample
supplies of water for maintenance and growth. Consequently, poultry can be raised less
expensively in warmer climates in regions where ample water is available.
Growers with no debt have a cash flow cushion to withstand market risks due to variability in the
number of flocks in a contract for a given year. Conversely, both net incomes and cash flows of
growers with substantial debt are more susceptible to problems due to flock inventory variations.
II.A.2. The Industry
While the agricultural segment of the U.S. economy has grown slightly on a relative percentage
basis from 1999 to 2014, the broiler sector share of the total U.S. agricultural economy declined
from 8.04 percent to 8.02 percent (Table 2). This decline occurred in spite of increases in
production, consumption, and exports of meat from broiler chickens.
19 Ibid. 20 Ibid. 21 Ibid.
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Table 2. Economic Indicators–Broiler, United States Year Gross Domestic Product
1 Agricultural Cash Receipts
2 Value of Broilers
3
1999 9,660.60 187,814,689 15.1
2000 10,284.80 192,097,825 14
2001 10,621.80 200,026,456 16.7
2002 10,977.50 194,588,257 13.4
2003 11,510.70 215,971,148 15.2
2004 12,274.90 237,853,261 20.4
2005 13,093.70 240,897,821 20.9
2006 13,855.90 240,623,888 17.7
2007 14,477.60 288,545,936 21.5
2008 14,718.60 316,093,638 23.2
2009 14,418.70 291,376,034 21.8
2010 14,964.40 322,174,469 23.7
2011 15,517.90 368,667,940 23
2012 16,163.20 404,823,995 24.8
2013 16,768.10 401,313,896 30.8
2014 17,418.90 407,392,615 32.7
Source: 1 Bureau of Economic Analysis, 2015, National Income and Product Accounts Table 1.1.5, Gross Domestic Product,
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1, accessed July 2015. 2 In Nominal dollars, USDA, ERS, 2015, Farm and Income Wealth Statistics, Annual cash receipts by commodity,
http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/cash-receipts-by-commodity.aspx#.VFutk_nF9qW, accessed July 2015.
3 USDA, ERS, 2015, Poultry Production and Value,
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1130, accessed July 2015.
The southern and mid-Atlantic states form the major broiler producing areas of the United States
(Table 3). Although number of head, pounds produced, and value all track relatively closely,
variations in the harvest weight of birds lead to modest differences between percent of head
produced and of pounds produced. The ERS estimated value produced is based on a constant
price.
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Table 3. Broiler Production by States, 20141
State
Number
Produced
(1,000 head)
Percent of
Number
Head
Produced
Pounds Produced
(1,000 pounds)
Value of
Production2 (1,000
dollars)
Percent of
Pounds/Value
Produced
Georgia 1,324,200 15.50 7,547,900 4,808,012 14.69
Alabama 1,061,500 12.42 6,050,600 3,854,232 11.78
Arkansas 969,800 11.35 6,012,800 3,830,154 11.70
North Carolina 795,200 9.31 6,043,500 3,849,710 11.76
Mississippi 727,200 8.51 4,508,600 2,871,978 8.78
Texas 591,800 6.93 3,550,800 2,261,860 6.91
Kentucky 308,000 3.60 1,724,800 1,098,698 3.36
Missouri 288,500 3.38 1,384,800 882,118 2.70
Maryland 287,800 3.37 1,554,100 989,962 3.03
Virginia 262,000 3.07 1,441,000 917,917 2.80
Delaware 244,100 2.86 1,733,100 1,103,985 3.37
South Carolina 232,500 2.72 1,650,800 1,051,560 3.21
Oklahoma 205,300 2.40 1,334,500 850,077 2.60
Pennsylvania 181,300 2.12 997,200 635,216 1.94
Tennessee 180,600 2.11 939,100 598,207 1.83
West Virginia 95,300 1.12 371,700 236,773 0.72
Ohio 75,600 0.88 430,900 274,483 0.84
Florida 66,700 0.78 386,900 246,455 0.75
Wisconsin 53,400 0.62 224,300 142,879 0.44
Minnesota 46,800 0.55 280,800 178,870 0.55
Other States3 546,500 6.40 3,204,900 2,041,521 6.24
United States Total 8,544,100
51,373,100 32,724,667
1 Broiler production including other domestic meat-type strains. 2 Live weight equivalent price, derived from ready-to-cook prices minus processing costs, then multiplied by a dressing percentage. 3 California, Illinois, Indiana, Iowa, Louisiana, Michigan, Nebraska, New York, Oregon, and Washington combined to avoid disclosing
individual operations.
Source: USDA, ERS. April 2015, Poultry - Production and Value 2014 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-30-2015.pdf, accessed July 2015
Nationally, broiler production decreased 5.5 percent from 2008 to 2014, from 9.01 billion birds
in 2008 to 8.54 billion birds in 2014. Over the same time, weight per bird increased by 7.5
percent, from 5.594 pounds to 6.013 pounds. The combined decrease in bird numbers and
increase in bird weight resulted in a 1.98 percent increase in total weight produced, from 50.4
billion pounds in 2008 to 51.4 billion pounds in 2014. The average weight per bird by
geographic area masks bi-modal production pattern resulting from two genetic body weight
groupings. Lighter birds are grown for the whole bird and parts markets and heavier birds are
grown for the breast market (with the remaining meat from the heavy birds going into processed
products and export markets). There are some differences in price per pound for these two
“types.”
Alabama, Arkansas, and Georgia accounted for fewer than 40 percent of the production in 2014
when two of these states (Georgia and Alabama) produced more than 1 billion birds.
Mississippi, North Carolina, and Texas comprise a second production tier, with harvests over
half a billion. Some states, primarily in the northeast and mountain states, reported little or no
commercial broiler production in 2014.22
22 USDA, NASS, 2015, Broiler Production by State Million Head, 2014,
http://www.nass.usda.gov/Charts_and_Maps/Poultry/brlmap.asp, accessed July 2015.
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Despite substantial research, the Contractor was unable to identify national data other than the
USDA NASS Census of Agriculture (Census) data at the county level for broilers. NASS annual
statistics do not include number of growers or county-level statistics in estimates derived from its
annual surveys. There are fragmented data available from a few state and county agencies and
industry associations. Farm-level data have not been obtained despite requests of people who
attended the listening sessions. Integrators, who have the most complete farm-level records for
substantial grower populations, consider all their data proprietary.
The 2012 Census reported 32,935 farms with “Broiler and other meat-type chickens sold,” a 21.5
percent increase over the 2007 reported 27,091 farms. NASS reported that 15,334 growers
produced more than 100,000 birds in 2012, and 41 percent of those growers produced more than
500,000 birds. A total of 7,183 farms were located in the 3 states ranked highest in broiler
production, and 42 percent of farms with reported sales over 100,000 birds were located in the
same 3 states. Commercial broiler production is organized and operated around broiler houses,
the major farm-level capital investment. No consistent national dataset that reported the number
of houses or houses per farm was identified.
Under the integrator/grower contract structure, the broiler enterprise might seem a safe haven for
the grower. However, this is not the case; growers must be concerned about performance of the
birds they are raising under contract. Broiler production is influenced by disease, weather,
equipment, building environment, and the quality of feed provided by the integrator. Also,
growers are not free from domestic and international market outcomes, even with a contracted
payment. The potential of subsequent contracts, and, to a lesser extent, the payment and
incentive provisions of the production contracts depend upon the integrator’s inventory of
processed meat and short- and intermediate-run market forecasts.
II.B. Turkey Sector
The United States is the world’s largest producer of turkeys. U.S. turkey production reached 7.5
billion pounds in 2012, with a total estimated farm-gate value of almost $5.5 billion. In 2013
these production numbers fell slightly to 7.2 billion pounds and $4.8 billion.23
While most
turkey produced in the United States is consumed domestically, the United States exports more
turkeys and turkey products than any other country. Brazil, with the second largest production,
harvested 1.1 billion pounds of turkey and Canada harvested 319 million pounds in 2013, while
the European Union-27 collectively produced 4.2 billion pounds.24
The average estimated price
received by U.S. turkey producers during 2013 was almost 67 cents per live-weight pound.25
In 2012, the United States exported almost 798 million pounds of turkey and turkey products (up
14 percent from 2011), valued at $678.9 million (up 13 percent). The majority of exported
turkey products are lower value parts (drumsticks, feet, wings, gizzards, livers, and hearts) and
ground or mechanically deboned meat. In 2012, Mexico was the biggest market for U.S. turkey,
23 USDA, RMA, 2014, Poultry - Production and Value, 2013 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-29-2014.pdf, accessed December 2014. 24 After The Poultry Site, Global Poultry Trends 2013: US Produces Half the World’s Turkey Meat,
http://www.thepoultrysite.com/articles/3177/global-poultry-trends-2013-us-produces-half-the-worlds-turkey-meat, accessed
December 2014. 25 USDA, RMA, 2014, Poultry - Production and Value, 2013 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-29-2014.pdf, accessed December 2014.
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accounting for over half of U.S. exports. The same year China imported more than $70.5 million
worth of turkey meat and both Canada and Hong Kong continued to import large amounts of
meat from the U.S. turkey industry.26
Many importers of U.S. production use turkey meat with
other meats to produce sausage. Competition from exporters of turkeys and turkey products,
particularly from Brazil, is likely to slow the growth of U.S. turkey exports.
U.S. per capita consumption of turkey has increased from 0.8 pounds in 191027
to 16.0 pounds in
2013.28
This reflects the evolution from a seasonal market (between Thanksgiving and New
Year’s Day) for a single-turkey product (whole birds), to a year-round, diversified, value-added
product line. Nonetheless, the whole turkey continues to be the most popular turkey product,
although its sale is no longer associated solely with the holiday season. The structure of the
turkey sector, with a wide variety of processed products, has changed turkey production into a
year round activity.
The average retail price for whole frozen turkeys in the United States in 2013 was $1.65 per
pound.29
Many processed turkey products have a substantial value-added component. A review
of internet grocery store prices shows some of these products retail at prices in excess of $9.00
per pound. Smoked and roasted turkey lunchmeats; ground breast meat; pre-roasted and ready-
to-roast turkey rolls; heat-and-eat turkey dinners; and turkey sausage, hot dogs, “bacon,”
“pastrami,” and “ham” illustrate the breadth of turkey products currently available. These
products have a substantial impact on total integrator revenues, but have limited effects on prices
received by growers.
II.B.1. The Crop
Turkeys are large birds in the order Galliformes, genus Meleagris. In the United States, turkeys
are raised only for meat (i.e., not for table eggs). Turkey meat is relatively lean when compared
to the meat of other domestic poultry species. The domesticated turkey is a descendant of the
wild turkey, Meleagris gallopavo. The dominant commercial breed of turkeys in the United
States is the Broad-breasted White (similar to “White Holland,” but a distinct breed). Most
commercial breeds have been selected for size as well as meat types and distribution. Since
2009 U.S. producers have raised over 250 million turkeys annually; even with the declining
number of turkeys raised, the average weight in 2013 (30.3 pounds) has enabled the total
production in pounds to remain relatively constant since 2008. That year the average weight was
29.0 pounds.30
Heritage breeds more closely resemble their wild ancestors and can breed naturally.31
Heritage
turkey breeds include Beltsville Small White, Black Spanish, Bourbon Red, Chocolate, Jersey
26 Marsh Laux, Agriculture Marketing Resource Center, Turkey Profile,
http://www.agmrc.org/commodities__products/livestock/poultry/turkey-profile/, accessed December 2014. 27 Ibid. 28 National Chicken Council, Per Capita Consumption of Poultry and Livestock, 1965 to Estimated 2014, in Pounds,
http://www.nationalchickencouncil.org/about-the-industry/statistics/per-capita-consumption-of-poultry-and-livestock-1965-to-
estimated-2012-in-pounds/, accessed December 2014. 29 USDA Economic Research Service Turkey Sector: Background & Statistics, http://www.ers.usda.gov/topics/in-the-
news/turkey-sector-background-statistics.aspx, accessed December 2014. 30 USDA, NASS, April 2014, Turkey Industry Overview,
http://www.nass.usda.gov/Publications/Highlights/2013_Turkey_Industry/, accessed December 2014. 31 The Broad-breasted White are propagated by artificial insemination.
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Buff, Lavender/Lilac, Narragansett, Royal Palm, Slate, Standard Bronze, White Holland, and
White Midget.32
These niche market birds command less than one percent of the U.S. market.33
While these breeds were originally selected for flavor and productivity (i.e., conversion of feed
to meat), they require more time to reach maturity than does the Broad-breasted White and are
less amenable to production in houses.
As with many Galliform species, the turkey hen (female) is smaller than the tom (male). Both
hens and toms are raised commercially. Hens are more likely to be marketed as whole birds. A
higher percentage of toms are processed into turkey products, such as lunchmeats, or sold to
restaurants and food services. Parts from both hens and toms may be diverted to export markets.
Mature Broad-breasted White toms are so large they are not able to fertilize hens naturally.
Consequently, semen is collected from toms and hens are inseminated artificially. Many hens
can be inseminated from each collection, so fewer breeding toms than hens are required. The
meat from culled breeders is used primarily in processed meat products.
In commercial production, turkey brood farms supply eggs to hatcheries, which may hatch eggs
from other species as well. After approximately 28 days, the hatched turkey poults are sexed,
boxed, and shipped to the grow-out facilities (a collection of turkey “houses”). At these
facilities, hens are raised separately from toms due to their different growth rates. Rations for
both sexes and all age cohorts generally include corn meal and soybean meal with added
vitamins and minerals. The feed mix is amended to achieve protein, carbohydrate, and fat levels
appropriate for the age cohort.
Most turkey grow-out facilities raise 50,000 to 75,000 birds with an average of 3.5 “turns” per
year (175,000 to more than 260,000 birds a year). Many of the larger facilities have a single
structure (the brood house) with the capacity to house as many as 100 thousand poults. Poults
are raised with an average density of one square foot per bird. Each of these brood houses
generally serves two grow-out houses. Consequently, 7 broods can be raised in a year to produce
the livestock for 3.5 grow-out production cycles per year in each of the grow-out houses. On
larger farms, multiple houses may be stocked, although normally all the birds on the farm are the
same age. This stocking approach helps to prevent diseases being passed among birds in
different age cohorts.
The majority of U.S. turkeys are grown in controlled-environment confinement houses or in pole
barns. The windowless confinement houses use modern systems of environmental control
(heating, ventilation, and lighting). Ventilation systems provide sufficient oxygen for the normal
growth and development and remove ammonia, carbon dioxide, dust, moisture, and heat.
Confinement houses may contain as many as 50,000 birds. Depending on the degree of
automation of the environmental control, feeding, and drinking systems, a single employee may
provide all the necessary labor for a confinement house.
32 Heritage Turkey Foundation, 2014, What is a Heritage Turkey, http://heritageturkeyfoundation.org/, accessed April 2015, and
American Livestock Breeds Conservancy, 2014, Breed Information – ALBC Conservation Priority List,
http://www.livestockconservancy.org/index.php/heritage/internal/conservation-priority-list#Turkeys, accessed April 2015. 33 Grace Communications Foundation, Talking Turkey, http://www.sustainabletable.org/432/talking-turkey, accessed April 2015.
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Environmental control within pole barns is more rudimentary. Consequently, labor requirements
are greater and stocking densities are lower. Turkey poults reared in pole barns are generally
raised in environmentally-controlled houses to 5 or 6 weeks of age. In the pole barns, the birds
are raised in natural light, supplemented during the winter months with electric light. In the
North, there is often limited control of temperature or ventilation in pole barns. The floor area of
turkey pole barns ranges from 10,000 to more than 20,000 square feet. Automated feeders and
watering systems maximize production, although the cost of such systems may limit their use.
Turkeys in the pole barns are raised on litter (wood shavings) and allowed to move freely within
the barn.
After removal of a flock, a two- to four-week period is allowed before a new flock is placed in
turkey brood and grow-out houses. During this time, the house is cleaned and disinfected. Old
litter is generally replaced after a flock is removed from turkey brood houses; however, wastes
may be removed from turkey grow-out houses just once each year. The decision on the timing of
cleaning of the grow-out houses is driven largely by the cost of labor and bedding. However,
following a disease outbreak, more extensive cleaning is required.
In most commercial operations, stocking densities in brood houses are set initially to maximize
production, and only change as a result of “normal” mortality until harvest. Hens in grow-out
houses are raised at a density of one per 2.5 square feet. Turkey hens consume about 40 pounds
of feed in their lifetime with a feed conversion rate (pounds of feed per pound of weight gain) of
about 2.5. Ten percent mortality during brooding and grow-out is assumed for planning the size
of the houses and the initial population. For harvest, the hens are collected in “modules” or
small cages, which are generally loaded onto flatbed trailers. Some additional mortality occurs
during transportation. Those losses are generally not considered when an integrator evaluates a
grower’s rank. However, the long-term trends of such losses may impact an integrator’s
decisions about levels of restocking. Slaughter and processing are mechanized to minimize
processing time.
Toms are raised at a density of 3 to 4 square feet per bird in the grow-out houses. Stocking
densities in contract grower operations are generally based on the recommendations of the
integrator. Toms consume about 90 pounds of feed during their lifetime with a feed conversion
rate of about 2.9. Commercial toms, which are more aggressive than hens, have a higher
mortality than the hens. Injurious pecking behavior can be a problem in enclosed confinement
houses. This behavior is usually controlled by reducing the light levels or by beak-trimming.
Some growers provide vegetable material or small objects for the turkeys to maneuver to distract
the birds from their aggressive behaviors. Toms are harvested at about 18 weeks (i.e., slightly
less than 3 production cycles each year). Some contract growers and producers reduce the
density of older toms by moving a portion of the birds into houses vacated by the hens when they
are harvested. This may reduce mortality marginally as the large birds compete for space and
feed. The harvest process for toms is essentially the same as that for hens.
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Free-range birds represent a small niche market in the turkey sector. The only requirement for
labeling with the term ‘free-range’ is the birds have access to the outdoors.34
Housing for free-
range birds is usually of the pole barn type. Natural daylight and green food may be available on
the range, but some source of food is generally provided in the barn. Slower growing strains,
low nutrient density feed, low stocking density, and longer production cycles characterize this
minor sector of the crop.
A typical turkey facility (a group of brood and grow-out houses with supporting storage) costs
well over $1 million. A typical facility will have one or two brooder houses and four to six
grow-out houses. Most individual houses are larger than 25,000 square feet. Depending on the
location, the house may have supplemental lighting, heat, ventilation, and automated feed and
watering systems. Most new turkey operations are funded with borrowed money. Loans from
an integrator are often based on a six or seven year payback. Typically, bank loans for a facility
have a longer term. In either case, the loan structures assume year round production.
Contract growers furnish the land, facilities, and labor under contract. They are paid based on
the grade, live weight, and feed conversion ratios of the birds delivered to the processing plant.
Each integrator contract is reported to be unique; and contracts between an integrator and
individual contract growers may also be quite different, taking into consideration such things as
the physical services available at a facility, mortality experience, and historic and current feed
conversion ratios. If the grower realizes a return of $7 to $8 per bird, the facility described as
“typical” may generate a cash flow of $1.25 million to $2.5 million per year. Cost of production
is more difficult to assess under the current integrator/contract grower industry structure. In
many cases, the integrator owns the turkeys, supplies feed, medicine, vaccines, and pays a grow-
out supervisor. The grow-out supervisor monitors the turkeys’ health and growth and decides
when veterinary attention, primarily medications or vaccinations, are required.
During the course of this project, the Contractor spoke with representatives of several operations
that fit neither the typical contract grower nor the typical producer paradigm. These operations
own the turkeys produced under a contract with an integrator and bear all the associated financial
risks in regard to losses from disease, price fluctuations, and poor weight gain. Twelve of the
fifteen members of the Minnesota Turkey Association Board of Directors fall into this unique
category.
II.B.2. The Industry
The U.S. turkey sector is dominated by vertically integrated agribusiness firms. In the second
half of the 20th
Century, after a period of decline in the sector, turkey hatcheries began providing
financing for the purchase of poults, while feed companies provided financing for both feed and
poults as a means to stimulate feed sales. These financial arrangements eventually evolved into
production contracts that shifted risk from grower to integrator. Under contract, the grower
provides the buildings, equipment, and labor; the integrator, who is usually involved in a variety
of post-harvest processing activities, provides poults, feed, veterinary services, and managerial
assistance. Most growers receive a fee per bird or per pound and contracts may provide
34 USDA, Food Safety and Inspection Service, 2014, Food Labeling: Meat and poultry Labeling Terms,
http://www.fsis.usda.gov/wps/portal/fsis/topics/food-safety-education/get-answers/food-safety-fact-sheets/food-labeling/meat-
and-poultry-labeling-terms/meat-and-poultry-labeling-terms, accessed April 2015.
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performance incentives for feed conversion and reduced mortality rates. Most, but not all,
integrators produce both whole bodied and further processed turkey products. The major turkey
integrators and their associated production for 2014 are documented in Table 4.
Table 4. Top U.S. Turkey Processors in 2014
Processor Live Weight Processed
(million pounds)
Butterball, LLC 1,300.0
Jennie-O Turkey Store 1,250.0
Cargill Value Added Meats 1,071.0
Farbest Foods, Inc. 411.0
Hillshire Brands Company (formerly Sara Lee) 402.0
Kraft Foods, Inc. (Oscar Mayer) 280.0
Perdue Farms, Inc. 277.0
Foster Farms 270.7
Virginia Poultry Growers Coop. 239.0
West Liberty Foods 216.3
Cooper Farms 205.0
Michigan Turkey Producers 190.0
Dakota Provisions 179.0
Hain Pure Protein Corp. 172.0
Turkey Valley Farms 145.0
Prestage Foods 140.0
Norbest, Inc. (Western Sales LLC) 82.0
Zacky Farms, LLC 68.3
Northern Pride Inc. 40.0
Whitewater Processing 30.0
Empire Kosher Poultry, Inc 25.2
Koch's Turkey Farm 15.2
Jaindl Turkey Sales, Inc 11.0
Source: The Contractor’s Research Department after Watt Poultry USA, 2014.
Turkey production is scattered throughout the United States. However, over half of all the
turkeys raised for slaughter in the United States in 2014 were raised in four states: Minnesota,
Arkansas, North Carolina, and Indiana (Table 5). While U.S. consumers eat more turkey per
capita and as a population than any other national consumer population, the U.S. turkey industry
is also more reliant on exports than most U.S. agricultural sectors. In the last decade, the peak
year for turkey production in the United States was 2008. Since that year, the number of turkeys
produced in the United States has declined from a high of 273 million to just 238 million in
2014. According to NASS, turkey production in 2014 was 7.2 billion pounds with a total farm-
level value of just over $5.3 billion. The market year average price per pound in 2013 was 67
cents per pound.35
35 USDA, NASS, 2014, Highlights, Turkey Industry Overview,
http://www.nass.usda.gov/Publications/Highlights/2013_Turkey_Industry/, accessed December 2014; USDA, NASS, 2015,
Quick Stats, http://quickstats.nass.usda.gov/results/5487DA7B-D988-3DF0-8884-2E407CE067F6, accessed June 2015.
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Table 5. Geographic Distribution of 2014 Turkey Production in the United States
State Number Raised
(1,000 head)
Pounds Produced
(1,000 lbs)
Value of Production
($1,000)
Minnesota 45,500 1,178,450 866,161
Arkansas 30,000 612,000 449,820
North Carolina 28,500 997,500 733,163
Indiana 19,000 754,300 554,411
Missouri 17,000 544,000 399,840
Virginia 16,800 443,520 325,987
California 11,000 310,200 227,997
Iowa 10,500 435,750 320,276
Pennsylvania 7,000 175,700 129,140
Ohio 5,100 209,100 153,689
Michigan 5,100 205,530 151,065
South Dakota 4,500 188,550 138,584
Utah 4,000 96,800 71,148
West Virginia 3,100 81,840 60,152
Other States1 30,400 983,816 723,104
United States 237,500 7,217,056 5,304,537
Source: USDA, NASS, 2015, Poultry - Production and Value - 2014 Summary, April 2015,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-30-2015.pdf, accessed July 2015. 1 Includes State estimates not shown and States withheld to avoid disclosing data for individual
operations.
By 1961, feed company contracts for production accounted for almost two-thirds of all turkey
production. Subsequently, processors became increasingly involved in production decisions and
began raising turkeys themselves to better ensure supplies. With the involvement of large feed
and processing firms, the share of turkeys sold on the U.S. spot market decreased substantially.
In 2011, turkey production contracts accounted for more than two-thirds of U.S. production.36
Vertically integrated operations, in which the processor owns the production facilities and hires
labor to care for the birds, accounted for almost one-third of turkey production. With 2014 farm-
level cash receipts of just over $5.3 billion (Table 6), turkeys accounted for approximately 11
percent of cash receipts for poultry in the United States.37
36 USDA, NASS, 2012 Census of Agriculture, Volume 1, Tables 32 and 45,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/, accessed January 2015. 37 USDA, NASS, April 2015, Poultry - Production and Value 2014 Summary
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-30-2015.pdf, accessed July 2015.
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Table 6. Economic Indicators – Turkeys, United States Year Gross Domestic Product
1 Agricultural Cash Receipts
2 Value of Turkeys
3
1999 9,660.60 187,814,689 2.8
2000 10,284.80 192,097,825 2.8
2001 10,621.80 200,026,456 2.8
2002 10,977.50 194,588,257 2.7
2003 11,510.70 215,971,148 2.7
2004 12,274.90 237,853,261 3.1
2005 13,093.70 240,897,821 3.2
2006 13,855.90 240,623,888 3.6
2007 14,477.60 288,545,936 4.0
2008 14,718.60 316,093,638 4.5
2009 14,418.70 291,376,034 3.6
2010 14,964.40 322,174,469 4.4
2011 15,517.90 368,667,940 4.9
2012 16,163.20 404,823,995 5.4
2013 16,768.10 401,313,896 4.8
2014 17,418.90 407,392,615 5.3
Source: 1/ Bureau of Economic Analysis, 2015, National Income and Product Accounts Table 1.1.5, Gross Domestic Product,
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1, accessed July 2015.
2/ In Nominal dollars, USDA, ERS, 2015, Farm and Income Wealth Statistics, Annual cash receipts by commodity,
http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/cash-receipts-by-commodity.aspx#.VFutk_nF9qW, accessed July 2015.
3/ USDA, ERS, 2015, Poultry Production and Value,
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1130, accessed July 2015.
On farms either owned by the integrators or managed under grower contracts, the integrator
generally provides the stock, feed, veterinary services, production technical support, and
transportation. The grower provides the growing facilities and day-to-day care and management
of the birds. The impact of production contracts on turkey enterprises are not as well
documented as are the impacts of production contracts on broiler enterprises.
The relative importance of direct production in the turkey sector to the U.S. agricultural and
overall economies is approximately one-fifth that of the broiler sector (see for example, Tables 3
and 5). However, it should be noted there are considerably more value-added processing
activities in the turkey sector than in the broiler sector. This amplifies the financial effects of
turkey production in the general economy.
Substantial research by the Contractor identified the NASS Census as the only source of national
turkey data at the county level. The 2012 Census documents some limited commercial turkey
production in every state.38
NASS annual statistics do not include number of growers or county-
level statistics in its annual surveys because there are insufficient numbers of growers in most
counties to allow reporting of results under the disclosure rules followed by NASS. There are
fragmentary data available from a few state and county agencies and industry associations.
These data do not provide the comprehensive and consistent descriptions available for other
enterprises.
38 USDA, RMA, Census of Agriculture, 2012 Census Volume 1, Chapter 2: State Level Data, Table 19,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_2_US_State_Level/st99_2_019_019.pdf,
accessed January 2015.
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Commercial turkey production is organized and operated around turkey houses, the major farm-
level capital investment. No dataset documenting the total number of houses by county or
houses per farm was identified. The 2012 Census reported 19,956 farms growing turkeys, a 15.8
percent increase over the 17,226 farms reported in the 2007 Census. NASS reported 833
growers produced more than 100,000 birds in 2012.39
Of the 19,956 operations, 1,903 grew
turkeys under contract, producing slightly more than two-thirds of the turkeys reported to have
been sold.40
The turkey sector has evolved to fewer than 25 highly specialized, vertically integrated
agribusiness firms. Under the grower/integrator structure, the turkey contract growers must be
concerned about performance of the contracted birds. Turkey production is influenced by
disease, weather, equipment, building environment, and the quality of feed. Also, growers are
not free from the effects of domestic and international market changes, even with a contracted
payment. An offer of subsequent contracts, and to a lesser extent the payment and incentive
provisions, depend on the integrator’s inventory of processed meat and short- and intermediate-
run market forecasts. Current inventories are higher than historically.
Both turkey contract growers and integrators have benefited from economies of scale associated
with the industry’s horizontal and vertical structure, but projected gains in efficiency over the
next decade are anticipated to be less than historical gains. Trade restrictions have slowed
growth in many U.S. animal product exports. Continuing concerns in the turkey industry with
AI and Exotic Newcastle Disease (END) have affected trade. The U.S. consumer will continue
to buy more meat but will use a smaller proportion of disposable income for meat purchases.
Poultry purchases will continue to rise as a share of consumer spending on meats, while beef and
pork expenditures are expected to decline.41
II.C. Layer Sector
The term ‘layer’ is the poultry industry name for a light hen maintained for egg production.
Hens from all varieties (breeds) of chickens lay eggs, but hens from only a few breeds
consistently lay eggs of appropriate size. Hens of laying breeds produce as many as 300 eggs a
year. The laying breeds are further divided into birds that produce white shelled eggs (breeds
generally developed from Leghorn stock) or brown shelled eggs (breeds developed from Rhode
Island Red and other stock).
The egg laying breeds of chickens have been genetically selected for high egg productivity.
They usually have small bodies that make them undesirable as meat producers. The small bodies
benefit laying breeds because the hens use fewer nutrients to produce and support body mass.
Instead, layers direct much of their energy into the egg production. After approximately 12
months of age, the hen’s egg-laying declines. Hormonal changes resulting from changes in diet
39 USDA, RMA, Census of Agriculture, 2012 Census Volume 1, Chapter 1: U.S. National Level Data, Table 32,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_032_033.pdf, accessed
January 2015.
40 USDA, RMA, Census of Agriculture, 2012 Census Volume 1, Chapter 1: U.S. National Level Data, Table 45,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_045_048.pdf, accessed
January 2015. 41 Iowa State University, 2013, AgMRC, Turkey Profile,
http://www.agmrc.org/commodities__products/livestock/poultry/turkey_profile.cfm, accessed January 2015.
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and photoperiod can be used to stimulate further egg production. After the layer reaches age one
and a half to two and a half years, commercial hens are typically slaughtered (culled). However,
laying can be stimulated by forcing the hen to molt. During the molt, laying stops completely.
Following the molt, the frequency of laying is increased relative to the pre-molt frequency. Meat
from culled layers is used in pet foods, soup, pies, and other processed foods.
Commercial chicken eggs include two categories of “table” eggs for human consumption, as well
as hatching eggs. “Shell” eggs are table eggs sold at retail, generally by the dozen. “Breaking”
or processed eggs are table eggs broken in specialized plants that transform the eggs into liquid
eggs or further process the liquid eggs into products, such as powdered eggs, that have a longer
shelf life. Production of processing eggs is generally a conscious output decision, rather than a
salvage activity. Operators (grower/integrator) of table egg production facilities do not generally
produce hatching eggs.42
Instead hatching eggs are raised by niche market poultry producers
including some subsidiaries operations of integrators.
Table eggs are produced by single-site independent poultry producers, contract operators, and
vertically integrated companies. The vertically integrated companies generally operate on
multiple-sites, which are distributed either regionally or nationally. Recent trends of decreasing
per capita shell egg consumption and increasing per capita processed egg product consumption
reflect both consumer lifestyle and industry changes. The increase in production of less-
perishable, processed egg products has generally reduced transportation costs for table eggs.
In-line breaking operations are located at the farm. Generally, one to five million hens are used
to support a breaking operation. Eggs are collected via belts beneath the cages from the houses.
Complex conveyor systems carry the eggs to the breaking plant. While some in-line operations
produce shell eggs with undersized, oversized, and under-grade eggs diverted for breaking, most
large facilities break all the eggs produced at that location. Some in-line operations of both sizes
have equipment to receive eggs from other locations for processing. This is sometimes referred
to as “side loading” in the literature.43
Modern in-line production, technologically advanced processing complexes, and lower feed cost
has led to increased egg production in the Midwest. Substantial consolidation occurred in the
layer sector during the last 25 years. The layer sector has exhibited substantial changes toward a
vertically integrated system. In 2013, Iowa, Ohio, Indiana, Pennsylvania, and California (in
order of dominance in the number of eggs produced) accounted for 45 percent of all table eggs
produced. Between 2001 and 2008, Iowa’s table egg production increased from 8.7 billion
eggs44
to 14.8 billion eggs.45
42 Perdue University maintains a Website devoted to avian sciences, including a PowerPoint presentation
(http://ag.ansc.purdue.edu/poultry/publication/commegg/) documenting most on-farm aspects of shell and breaker egg
production. 43 The Egg Sector Working Group (an industry committee primarily staffed by grower association representatives); the
University of Minnesota’s Center for Animal Health and Food Safety; and USD, APHIS, 2009 (draft), An Assessment of the
Risk Associated with the Movement of Nonpasteurized Liquid Egg (NPLE)and Its Products Into, Within, and Outside of a
Control Area during a Highly Pathogenic Avian Influenza Outbreak, http://secureeggsupply.com/wp-
content/uploads/RANonPasteurLiquidEggs.pdf, accessed July 2015. 44
USDA, NASS, 2002, NASS Poultry - Production and Value 2001 Summary, http://usda.mannlib.cornell.edu/usda/nass/PoulProdVa//2000s/2002/PoulProdVa-04-29-2002.pdf, accessed January 2015.
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There are 172 egg-producing companies with flocks of 75,000 layers or more, 63 companies
with more than 1 million layers, and 16 companies with more than 5 million layers. Companies
with at least 75,000 layers account for approximately 99 percent of all egg production in the
United States. 46
In contrast, in 1987, there were approximately 2,500 operations comprising the
top 95 percent of egg production.47
Integrated production sites often have more than one million
birds, a feed mill, and an in-line processing plant. While economies of scale are likely to be
gained at relatively low levels of output (as low as 30,000 layers), diseconomies of scale at a
single facility are apparently not realized until output exceeds that of the largest production sites,
with more than six houses and more than one million hens.
It should be noted that new regulations in California, Standards for Confining Farm Animals,
went into effect on January 1, 2015. These regulations have had a large impact on the layer
industry and may impact the average size (number of hens in a house) on a production site.
Proposition 2, as it is called in California, requires all eggs sold in California to come from
chickens that have enough room to fully extend their limbs and turn around freely.48
Missouri,
Nebraska, Oklahoma, Alabama and Kentucky, and Iowa filed legal challenges to the California
regulations. The initial federal court decision in October 2014 was in favor of California, but the
six states have carried the challenge to the U.S. Ninth Circuit Court of Appeals.49
II.C.1. The Crop
Eggs are the crop from layer operations. The layers are the capital asset producing the eggs.50
Shell eggs are usually sold by the carton at retail, while breaking eggs are subjected to a variety
of value-added processing. There is an irony in the value-added economics of breaking eggs,
since historically these eggs were salvaged, under grade, deformed, or checked. Paul Aho, a
national expert on the layer sector noted, “The breaker market was of last resort when a suitable
shell egg market could not be found.” As the market for processed egg products expanded,
processors/breakers began purchasing sound, problem free, shell eggs at a discount to retail
prices.51
“The big difference… compared to the processed egg market of just [20] years ago is
that egg products (liquid, dried and frozen) have replaced shell eggs in most industrial food
applications.”52
In addition to improvements in in-line breaking plant technology and lifestyle
changes among those who used to purchase substantial quantities of breaking eggs, Salmonella
45 USDA, NASS, 2014, NASS Poultry - Production and Value 2013 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-29-2014.pdf, accessed January 2015. 46 American Egg Board, 2010, Egg Industry Fact Sheet, http://www.aeb.org/egg-industry/industry-facts/egg-industry-facts-sheet,
accessed May 2010. 47 Watts and Associates, 2010, Final Feasibility Report, Feasibility Research Report for Insuring Commercial Poultry Production,
http://www.rma.usda.gov/pubs/2011/poultryfeasibility.pdf, accessed January 2015.
48 National Public Radio, December 29, 2014, Dan Charles, How California’s New Rules Are Scrambling The Egg Industry,
http://www.npr.org/blogs/thesalt/2014/12/29/373802858/how-californias-new-rules-are-scrambling-the-egg-industry, accessed
January 2015.
49 Dan Flynn, Egg Safety News, 2015, Egg-Producing States File Appeal Over California’s Proposition 2,
http://www.foodsafetynews.com/2015/03/six-egg-producing-states-file-appeal-over-californias-proposition-
2/#.VZVkw_lViko, accessed July 2015. 50 Some parallels with the production of fruits from trees in orchards and groves have been noted in the layer/egg relationship. 51 The discount is due to reduced packaging and distribution costs. 52 Watts and Associates, 2004, Final Research Report, Livestock Insurance Program, Volume V: Layer Segment, delivered to
USDA, RMA.
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outbreaks in the 1990s53
resulted in a doubling of the use of pasteurized liquid eggs and other
processed egg products between 1990 and 2008.54
Nonetheless, production of eggs has not changed substantially since 2001. In 2001, 334.9
million layers produced 85.7 billion eggs, an average of 256 eggs per hen, with 85 percent of the
eggs used for the table (i.e., breaking or shell eggs). In 2013, 346.4 million layers produced 95.2
billion eggs, an average of 275 eggs per hen, with 87 percent of the eggs used for the table.55
Price and consumer lifestyle changes are key factors reducing per capita shell egg consumption
while increasing per capita consumption of broken (processing) eggs. Breaking eggs are an
output product of specialized, in-line breaking technologies. Processing reduces volume and
consequently transportation costs are reduced.
Egg production in the United States is widely dispersed (Table 7). Commercial egg production
is reported in all 50 states; minor production areas are combined to avoid disclosure of data
concerning individual operations. The perishable nature of shell eggs explains the historical
dispersal of production. Changes in technology and demand are driving regional concentration
of production. These, along with differences in use and proximity to markets, are driving
substantial differences in prices.
53 Aho, P. Updated 2000. “Regional Egg Production Trends, Poultry Science and Technology Facts.” Cornell University,
Department of Poultry and Avian Sciences. 54 After American Egg Board, 2010, Shell Egg Distribution, http://www.aeb.org/egg-industry/industry-facts/shell-egg-
distribution, accessed April 2015. 55 USDA, NASS, 2014, Chickens and Eggs 2013 Summary, February 2014,
http://usda.mannlib.cornell.edu/usda/current/ChickEgg/ChickEgg-02-27-2014.pdf, accessed January 2015.
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Table 7. 2014 United States Egg Production by State
State Eggs Produced
(million eggs)
Value of Production
(1,000 dollars) State
Eggs Produced
(million eggs)
Value of Production
(1,000 dollars)
Alabama 2,148 400,702 Nebraska 2,860 240,418
Arkansas 2,962 482,351 New York 1,493 133,257
California 4,551 419,135 North Carolina 3,381 500,989
Colorado 1,450 130,584 Ohio 8,731 744,317
Connecticut 669 61,646 Oklahoma 712 102,226
Florida 2,390 218,994 Oregon 727 65,781
Georgia 4,723 665,866 Pennsylvania 7,570 715,299
Illinois 1,409 124,258 South Carolina 1,117 130,060
Indiana 7,747 674,076 South Dakota 752 63,293
Iowa 16,449 1,403,504 Tennessee 341 67,997
Kentucky 1,219 154,849 Texas 5,109 526,459
Louisiana 541 72,828 Utah 1,180 106,640
Maine 989 86,266 Vermont 36 4,275
Maryland 785 70,753 Virginia 765 114,346
Massachusetts 44 3,844 Washington 1,950 176,805
Michigan 3,867 325,322 West Virginia 270 55,886
Minnesota 3,071 265,908 Wisconsin 1,449 129,890
Mississippi 1,351 234,653 Other States 1 2,410 227,573
Missouri 2,407 252,305
Montana 143 12,966 United States 99,768 10,166,321
Source: USDA, NASS, April 2015, Poultry - Production and Value Summary, 2014 Summary,
http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-04-30-2015.pdf, accessed July 2015. 1 Alaska, Arizona, Delaware, Hawaii, Idaho, Kansas, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Rhode Island,
and Wyoming combined to avoid disclosing individual operations.
Production Profile
Upon arrival at the operator’s facilities, chicks are placed in either a pullet house or layer pens.
Chicks in pullet houses are raised on open floors covered with wood shavings or similar bedding
material. During the first week, beaks are usually trimmed. The pullets remain in the pullet
house for 10 to 15 weeks, until attaining an appropriate size, and then are moved into layer
cages. Alternatively, for chicks placed immediately into layer cages, a biodegradable mat is
placed on the floor of the pen. The mat allows chicks to locate feed and adjust to the wire mesh
floor. Within a week, the mat is removed or degrades. A layer cage may initially be occupied by
as many as fifty chicks, but as the chicks mature, the population density is decreased.
The chicks’ daily light exposure is increased at 16 to 23 weeks of age. An appropriate lighting
program provides adequate light to stimulate a hormonal reaction, but is managed to control
electrical costs. Chickens perceive dawn as the first light following the longest dark period in
the 24 hour cycle. Consequently, photo-schedules often contain a longer dark period to establish
a photo-sensitivity phase (perception of dawn) and the timing of oviposition (when the egg is
laid). Continuous light triggers laying, but short repeated cycles of light (e.g., an hour light
followed by two hours of darkness) can reduce costs of lighting by more than 66 percent.
Different operators use different lighting schedules to stimulate egg production while minimizing
electrical costs. If the hen has not reached an adequate body weight by 18 weeks of age, egg
production declines. The lighter layers are culled to limit feed consumption.
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The layers’ diet is also altered to support egg production. Layer pullets are fed according to
body weight and/or age. Mature layers are generally fed ad libitum. The feed is generally
offered to the layers by automated systems (e.g., chain feeding systems). In general, 2 inches of
feeder space are allotted for each pullet and 2.5 inches or more are allocated for each adult layer.
Dietary protein and energy composition are adjusted based on age of the hens. Young layers are
fed a high protein diet (e.g., 20 percent protein) during the first few weeks of life. This level is
gradually decreased to12 to 15 percent protein during egg production. Feed lysine, methionine,
calcium, and phosphorus are also adjusted to support maximum egg production.
At 18 to 22 weeks of age, 10 to 20 percent of the hens are laying eggs each day. At 30 to 32
weeks of age, 90 percent of the hens are laying each day. By the time the hens are 70 weeks old,
the number of hens laying eggs daily decreases to approximately 50 percent. At this level of
production, variable costs are approximately equal to the income. Induced molting can increase
production for another 20 to 30 weeks. Layers may be molted a second time to maintain
production through 120 to 130 weeks of age or sent directly to slaughter after a single molt when
they reach 100 to 110 weeks of age. Whether a second molt is induced is influenced by egg
prices and the availability of replacement birds. The recent loss of layers to HPAI will likely
lead many operations to molt their birds until production costs exceed revenues. Even under
these circumstances, production may be continued to preserve market share.
Hens lay eggs onto an angled cage floor (sloping 8 to 10 degrees toward the collection belt). The
eggs roll toward the front of the cage onto a slowly moving belt. The belt transports eggs out of
the house to either the egg processing facility or refrigerated storage.
In an in-line shell egg facility, eggs move directly from the layer house to the egg processing
facility where they are washed, inspected manually, graded for packaging, and moved into cold
storage. Operators generally deliver eggs to retailers approximately a week after they are laid.
In an on-line breaking facility, the eggs are washed, inspected manually, and broken. The raw
liquid eggs are moved to storage silos, then to pasteurization units, and finally to processing units
to make dry, liquid, or frozen products. Since the facility is highly mechanized, there are
relatively few employees and the facility can be operated 24 hours a day. In off-line production
facilities the eggs are moved from the house directly into refrigerated storage. The eggs are
stored two to three days, and then they are transported to a packing or processing facility by
refrigerated trucks.
After the flock is removed from the layer house, the house is stripped of all organic matter. It is
then sanitized with liquid disinfectants. Drying is required before another flock enters the house.
The total down time lasts one to several weeks.
As noted earlier, most operators in the layer sector are concerned with table egg production. A
second, smaller category of layer production is hatching eggs. These are produced on niche
market breeder farms. These breeder farms produce fertile eggs that hatch into chicks for
production of both broiler and layer stock.56
Some breeder operations run their own hatcheries.
Other hatcheries are run independently. Breeder farms are particularly concerned about genetic
56 Aho, P. Updated 2000. “Regional Egg Production Trends, Poultry Science and Technology Facts.” Cornell University,
Department of Poultry and Avian Sciences.
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characteristics of the stock. This intellectual property makes these layer hens particularly
valuable.
II.C.2. The Industry
The two primary types of operating arrangements within the layer sector are farms owned by
contract growers and producer-owned farms. Contract operators own or control the land,
buildings, and labor inputs used to produce eggs under contract to integrators, who process the
eggs for retail sales or for breaking. On producer-owned farms, independent operators own farm
assets, own and manage the flock. Most producer-owned operations are large, vertically
integrated, regional and national firms.57
The large integrated firms (both producer-owned and
firms with an integrator structure more like that in the broiler sector) are the result of a turbulent
period of consolidation and bankruptcies during the late 1970s and early 1980s. Consolidation
has continued as some egg producers integrated vertically into processing, and some processing
firms acquire ownership of layer operations. However, producer-owned operations include some
smaller independent operations with vertical integration. However, these operations are likely
candidates for takeover. Compared to large, integrated companies with a national presence,
smaller independent egg producers are at a disadvantage when dealing with the rapidly
consolidating wholesale-food industry.
The Census reported 3,144 farms produced eggs under contract in 2012 (a 5.61 percent decrease
from 2007). In 2012, almost 22 billion eggs were produced under contract.58
More than 97
percent of the table eggs were produced by producer-owned operations. In 2012, 4.6 billion eggs
(approximately 4 percent of all egg production) were broken under Federal inspection. Egg
production is not a simple farming process. The processing of the eggs, whether for the retail
purchase or breaking, add considerably to the complexity of the operations. One notable
complication is the substantial oversight by government agencies. The cleaning process for both
shell and breaking eggs is overseen by the USDA Agricultural Marketing Service (AMS). Shell
egg safety is overseen by the United States Department of Health and Human Services Food and
Drug Administration (FDA). Breaking egg processing is overseen by the USDA Food Safety
and Inspection Service. In addition to this federal oversight, most states’ agriculture and/or
health departments take an active role in egg safety oversight. 59
The layer segment accounts for approximately 2 percent of the U.S. agriculture economy (Table
8). The distribution of this economic impact by state is evident in the production value in Table
14. In 1995, egg production in California, Georgia, Indiana, Ohio, and Pennsylvania, the top five
egg producing states (by number of eggs produced), accounted for 37 percent of U.S. table egg
production. By 2001, the top five egg producing states accounted for 41 percent of table egg
production and Georgia had dropped out of the top five egg producing states. By 2001, egg
57 Paul Aho, personal communication. 58 USDA, NASS, 2012 Census of Agriculture, Table 45,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_045_048.pdf, accessed
January 2015. 59 Tai, S., 2015, Food safety regulation in the United States: An overview of the actors,
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB4QFjAA&url=http%3
A%2F%2Flaw.wisc.edu%2Fgls%2Fdocuments%2Ffood_safety_actors-1.ppt&ei=OZCVVZC-
J8ybgwTH0oCYCg&usg=AFQjCNEY5IrVJNU8RXZdK8KThG8VoEmCAw&bvm=bv.96952980,d.eXY, accessed July
2015.
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production in Iowa had doubled, increasing from 4.3 billion eggs in 1995 to 8.7 billion eggs. By
2013, the top five states accounted for 45 percent of egg production, and included (in order of
number of eggs produced) Iowa, Ohio, Indiana, Pennsylvania, and California. It is interesting to
note that the top five states in order of total value of egg production in 2013 were, in order: Iowa,
Georgia, Pennsylvania, Ohio, and Indiana. NASS publishes less complete data on hatching egg
production because of the requirements for confidentiality. Over a billion hatching eggs were
produced in 2014. Major production states included Alabama, Arkansas, Georgia, Mississippi,
and North Carolina. Other substantial production occurred on very large operations whose
location could not be disclosed.60
Table 8. Economic Indicators – Layer Segment United States Year Gross Domestic Product
1 Agricultural Cash Receipts
2 Value of Egg Production
3
1999 9,660.60 187,814,689 4.3
2000 10,284.80 192,097,825 4.3
2001 10,621.80 200,026,456 4.4
2002 10,977.50 194,588,257 4.3
2003 11,510.70 215,971,148 5.3
2004 12,274.90 237,853,261 5.3
2005 13,093.70 240,897,821 4.0
2006 13,855.90 240,623,888 4.4
2007 14,477.60 288,545,936 6.7
2008 14,718.60 316,093,638 8.2
2009 14,418.70 291,376,034 6.2
2010 14,964.40 322,174,469 6.5
2011 15,517.90 368,667,940 7.3
2012 16,163.20 404,823,995 7.9
2013 16,768.10 401,313,896 8.7
2014 17,418.90 407,392,615 10.2
Source: 1/ Bureau of Economic Analysis, 2015, National Income and Product Accounts Table 1.1.5, Gross Domestic Product,
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1, accessed July 2015.
2/ In Nominal dollars, USDA, ERS, 2015, Farm and Income Wealth Statistics, Annual cash receipts by commodity, http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/cash-receipts-by-
commodity.aspx#.VFutk_nF9qW, accessed July 2015.
3/ USDA, ERS, 2015, Poultry Production and Value, http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1130, accessed July 2015.
The 2012 Census reported 198,272 farms with an inventory of layers – a 36 percent increase
over the 2007 Census numbers. However, 174,211 (88 percent) of the reported farms had fewer
than 50 hens – a 39 percent increase from 2007, and only 4,719 (2.4 percent) had more than 400
hens. Only 387 of those farms with more than 400 hens had more than 100,000 hens. 61
The
American Egg Board reported 176 egg producing companies had flocks of 75,000 hens or more.
These companies owned approximately 95 percent of all U.S. layers in 2014.62
Cal-Maine Foods of Mississippi is the largest shell egg producer (Table 9). Cal-Maine is a
“pure” shell egg producer without any breaking facilities. National and regional supermarket
chains buy directly from this company, generally with packaging under each retailer’s brand
60 USDA, NASS, 2015, Chickens and Eggs, http://www.usda.gov/nass/PUBS/TODAYRPT/ckeg0215.pdf, accessed July 2015. 61 USDA, NASS, 2012 Census of Agriculture,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_2_US_State_Level/st99_2_019_019.pdf,
accessed January 2015. 62 American Egg Board, 2014, U.S. Egg Industry Egg Facts – Q1 2014, http://www.aeb.org/search/result-item/69-farmers-
marketers/market-data-trends/231-u-s-egg-industry-egg-facts, accessed January 2015.
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name. The second-largest producer, Rose Acre, is a privately owned company with both shell
and breaking egg production. Moark, LLC, the third-ranked firm, produces eggs for processing
and sells egg products and other food items.
Table 9. Top Ten Egg Production Companies: 2013
Company Layers in Production
(million)
Cal-Maine Foods 33.0
Rose Acre Farms 24.6
Moark LLC 16.0
Rembrandt Enterprises 13.6
Daybreak Foods 13.0
Michael Foods 11.3
Trillium Farm Holdings 9.9
Midwest Poultry Services 8.5
Centrum Valley Farms 7.5
Hillandale Farms 7.5
Weaver Brothers 7.5
Source: The Contractors Research Department after WATTAgNet, 2014, 2013 Egg
Industry Survey,
http://www.wattagnet.net/2013_Egg_Industry_Survey__Industry_prepares_for_major_changes_in_2014.html, accessed April 2015.
Many of the largest operations producing shell eggs are in the Midwest. This is evident when the
number of large farms is evaluated (Table 10). The upper Midwest also currently dominates in
the production of processing eggs. Many in-line production and processing complexes with on-
site feed preparation facilities were constructed during the last quarter of the 20th
Century. These
complexes are now operated by low cost producers with large markets for processed egg
products. Since feed costs account for about 66 percent of the total farm cost of egg production,
the lowest feed cost area in the United States is likely to have the lowest total cost of egg
production.
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Table 10. Top Ten States (in order of Value Sold): Number of Farms Reporting Layers 2012 Census of Agriculture Number of
Layers Iowa Georgia Pennsylvania Ohio Indiana Arkansas Texas
North
Carolina Alabama California Total U.S.
Percent
of U.S.
1 to 49 3,246 2,672 7,921 7,313 4,910 2,818 18,058 4,070 2,587 6,069 59,664 174,211 34%
50 to 99 283 266 683 679 400 211 1,055 350 324 339 4,590 13,074 35%
100 to 399 147 106 465 372 158 76 403 185 173 245 2,330 6,268 37%
400 to 3,199 31 24 123 36 25 6 71 40 31 39 426 1,103 39%
3,200 to 9,999 40 37 83 9 2 54 9 74 25 4 337 482 70%
10,000 to 19,999 18 112 81 40 12 187 22 101 175 4 752 1,199 63%
20,000 to 49,999 8 229 64 29 41 180 89 148 138 5 931 1,292 72%
50,000 to 99,999 8 14 68 33 7 10 17 23 7 8 195 256 76%
100,000 or more 40 23 51 37 29 7 24 5 9 31 256 387 66%
Total 3,821 3,483 9,539 8,548 5,584 3,549 19,748 4,996 3,469 6,744 69,481 198,272 35%
Source: USDA, NASS, 2012 Census of Agriculture, Table 19, http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf, accessed January 2015
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Although the feed cost differences between the Midwest and other parts of the country are well
understood, production cost differences from west to east within the Midwest are often
overlooked.63
These have influenced the concentration of production among the Midwestern
states and within individual states. The North Atlantic region, with high grain, labor, and land
costs, has imported a large percentage of its eggs during the last 50 years. More recently,
compliance with environmental guidelines, urban encroachment into rural areas, and food safety
issues have further increased that region’s relative costs. However, as a result of its proximity to
large population centers, the North Atlantic region will continue to produce a substantial quantity
of shell eggs. However, in the North Atlantic states, only under-grade eggs are likely to be
broken.64
Market Structure
Both shell eggs and liquid eggs can be transported long distances using refrigerated trucks.
Producers typically sell to a variety of markets, including both local and national prepared food
industry buyers (e.g., fast food restaurants chains and bakeries), national supermarket chains,
smaller regional grocery stores, independent egg product processors, and institutional buyers
(e.g., prisons, colleges, U.S. military, etc.). Given the vertical integration of large firms and
contract egg production, egg buyers at the “farm gate” are frequently the integrators themselves.
The estimated 229 million cases of eggs produced in 2013 were distributed as follows:
73.3 million cases (32.0 percent) were further processed;
122.1 million cases (53.3 percent) were sold at retail;
22.9 million cases (10.0 percent) were used in food services; and
10.7 million cases (4.7 percent) were exported.65
Independent poultry producers have incentive to increase in size or to act jointly to achieve a
more equal bargaining position with the large, national firms which are potential buyers of their
products. Consequently, bargaining associations and marketing cooperatives are active in the
industry. Urner Barry’s Market Price Reports serves as a basis for establishing the price for
many contract sales. Contract length and settlement terms are extremely varied. While contracts
are common, spot market transactions for some egg output are a matter of routine for nearly all
firms as a way to deal with inventory fluctuations.
Egg producing operations are successful over a considerable range of potential output. It appears
the long-run average cost curve is relatively constant over an extended range of targeted
production. There are substantial economies of scale to be gained as operations increase in size.
Layer enterprises tend to be focused on egg production. Few layer sites include other
agricultural activities.
To the layperson, eggs are produced in “chicken houses.” However, these houses are extremely
sophisticated, controlled-environment facilities. If there is a mechanical failure in the climate
control system, growers and producers have a 15-minute window before egg production is
63 Aho, P. Updated 2000. “Regional Egg Production Trends, Poultry Science and Technology Facts.” Cornell University,
Department of Poultry and Avian Sciences. 64 Ibid. 65 American Egg Board, 2014, U.S. Egg Industry Egg Facts – Q1 2014, http://www.aeb.org/search/result-item/69-farmers-
marketers/market-data-trends/231-u-s-egg-industry-egg-facts, accessed January 2015.
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measurably affected and a 30-minute window before hen mortality begins. The environment is
further regulated with thorough and strict sanitary practices and disease prevention and security
regimens. Thus, competent managers of very large firms are confident in their perception of the
“things that could go wrong,” analysis of alternatives to prevent occurrence of those events (or at
least mitigate the effects), and ability to implement the “best” strategy. Under such tightly
managed conditions, there are few risks for which contingency plans do not exist. As large
consolidated firms have grown to increasingly dominate the market, the fraction of total
production under less intensive management schemes has grown very small.
Egg growers and producers are subject to state regulations regarding flock management, egg
grading, egg handling and transport, and the environment. Some state regulations specify
aspects of building design and construction, husbandry practices, and bird space requirements.
In November 2008, California voters approved Proposition 2, effective in 2015, which requires
egg-laying hens be housed with sufficient room to lie down, stand, turn around, and fully extend
their limbs. State regulations regarding egg handling generally align with USDA Egg Grading
Standards66
and Shell Egg Surveillance Inspections.67
Egg quality assurance is a part of state
code. Environmental standards address manure and dead bird disposal and Animal Feeding
Operations and Concentrated Animal Feeding Operations designation standards. However, some
exceptional state regulations are in place. Thirteen states prohibit repacking shell eggs to limit
the spread of Salmonella.68
Pennsylvania requires all eggs be refrigerated throughout the
distribution chain. Brand names must be registered by California egg handlers. Ohio poultry
farms that discharge waste water into waterways are required to have a National Pollutant
Discharge Elimination System (NPDES) permit, regardless of federal requirements for such a
permit. This complex regulatory environment has been perceived by egg producers to add
substantially to production costs.
II.D. Game Birds
Game birds are raised primarily for specialty food markets, restaurants, and for release into the
wild for sport hunting. Private individuals in the United States have been raising game birds for
more than 100 years for meat and hunting. Game bird producers and hunting preserves are
licensed and regulated in all 50 states by state conservation departments. The game bird sector
has experienced dramatic growth since 2000. As early as 2003, the game bird sector contributed
more than $1.5 billion to the U.S. economy. A majority of this income was from sales of adult
birds. A majority of the sector expenses were labor.69
In 2013, the game bird industry in the
United States produced nearly 52 million birds of various species is raised yearly for meat and
sport hunting.70
66 USDA, AMS, 2000, United States Standards, Grades, and Weight Classes for Shell Eggs,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004376, accessed January 2015. 67 USDA, AMS, 2006, Regulations Governing the Inspection of Eggs,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004691, accessed January 2015. 68 Eskin, S.B., 2004, “Putting All Your Eggs in One Basket: Egg Safety and the Case for a Single Food-Safety Agency,” Food
and Drug Law Journal, 59: 441-452. 69 North American Gamebird Association and North American Gamebird Foundation, 2004, Hunting Preserves and Gamebird
Farms, Preserving Wildlife and Rural America, https://www.mynaga.org/wp-
content/assets/2012/07/Preserves_Wildlife_America.pdf, accessed January 2015.
70 Dan Burden, AgMRC, 20154, Game Birds Profile, http://www.agmrc.org/commodities__products/agritourism/game-birds-
profile/, accessed January 2015.
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The top five game bird types produced in the United States are pheasant, bobwhite quail, chukar
partridge, mallard ducks, and wild turkeys. Additionally, there are many “decorative fowl”
raised in the United States which fall into this segment of poultry.71
Game bird farms and
hunting preserves maintained for farmed birds include over 16 million acres of agricultural land,
preserving these lands from development and protecting the wildlife habitat.72
The game bird
industry has grown to such an extent that it is now represented in the National Poultry
Improvement Plan (NPIP) on decisions regarding disease testing or potential requirements in
case of disease outbreaks or new regulations.73
II.D.1. The Crop
“Game birds are native or non-native birds that historically were wild game … but are now
raised commercially for their meat or egg production or as ‘flight-ready’ birds for release on
hunting preserves or by state wildlife agencies. Game birds may include guinea fowl, partridges,
peacocks, pheasants, pigeons and doves, quail or squab (a young pigeon), swans, wild turkeys
and some ducks, such as mallards or wood ducks. Only a few species of pheasants, partridges
and quail are raised as flight-ready birds; an extremely large number of species and variants are
raised for the ‘decorative pet’ exhibit or hobby market.”74
Game birds are raised by individual producers, in many cases as a side or hobby business. The
commercial production of game birds requires specialized housing, netting or fencing systems,
knowledge of common diseases of game birds, and an identified market. Game birds may be
raised for use in the specialty food markets (ethnic cuisine specifically), as exotic pets (peafowl,
guinea hens) or as flight-ready birds for release and restocking operations (on game preserves or
for U.S. government repopulation and reintroduction efforts).
II.D.2. The Industry
Homeowners and hobbyists make up the bulk of the industry. These producers have contacts in
the local markets who purchase the game bird from the producer through direct marketing or
under a contractual agreement. Replacement chicks are either produced on the operation or are
purchased through catalogs and online supply venues. Independent game bird production
operations truly began to blossom following a mid-1990’s report from the American Farmland
Trust organization which identified approximately one million acres of agricultural lands being
lost to development yearly.75
Along with the land being lost to agriculture, the wildlife habitat
and associated wildlife were being lost as well. The game bird industry began in earnest as an
effort to preserve both habitat and wildlife for future generations. In the late 1990’s, the game
bird industry was focused on repopulation and reintroducing game birds to regions in the United
71 Ibid.
72 North American Gamebird Association and North American Gamebird Foundation, 2004, Hunting Preserves and
Gamebird Farms, Preserving Wildlife and Rural America, https://www.mynaga.org/wp-
content/assets/2012/07/Preserves_Wildlife_America.pdf, accessed January 2015. 73
North American Gamebird Association, 2015, About, https://www.mynaga.org/about/, accessed January 2015 74 AgMRC, Game Birds Profile, Dan Burden, Iowa State University,
http://www.agmrc.org/commodities__products/agritourism/game-birds-profile/, accessed January 2015. 75
North American Gamebird Association and North American Gamebird Foundation, 2004, Hunting Preserves and
Gamebird Farms, Preserving Wildlife and Rural America, https://www.mynaga.org/wp-
content/assets/2012/07/Preserves_Wildlife_America.pdf, accessed January 2015.
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States where development had driven the wildlife away. Since that period, game bird production
has expanded its market footprint to include ethnic food markets and exotic pet markets.
The 2012 Census reported Georgia as having the highest population of production game birds in
the nation with 2.52 million birds, followed closely by California (2.39 million), Indiana (2.37
million), Pennsylvania (2.18 million), and Alabama (2.14 million). With 8,435 game bird farms,
Texas boasted the highest number of operations raising game birds in 2012 followed distantly by
Pennsylvania (3,324), Wisconsin (3,300), Missouri (2,868), and Michigan (2,809).76
Besides
broilers, turkeys and layers, NASS gathers information on 14 additional types of poultry
production for the Census report. The United States had an inventory of more than 23 million
game birds reported in the 2012 Census and more than 77 thousand operations raising those
birds.
Table 11. Game Birds Reported in 2012 Census of Agriculture by Inventory Type Inventory Operations Top Production State
Roosters 7,564,783 13,399 Arkansas
Quail 6,304,956 2,310 Georgia
Ducks 5,018,661 21,115 Indiana
Pheasants 2,436,570 2,322 Wisconsin
Chukars 805,552 604 Pennsylvania
Guineas 460,932 14,694 Pennsylvania
Pigeons or squabs 415,365 2,149 California
Other poultry 372,483 2,213 Pennsylvania
Geese 106,462 10,286 Texas
Hungarian partridge 52,245 44 Pennsylvania
Peacocks or peahens 46,998 6,076 Texas
Emus 13,281 1,550 Texas
Ostriches 6,540 258 Texas
Rheas 1,424 218 Texas
Total 23,606,252 77,238
Source: USDA, NASS, 2012 Census of Agriculture, 2012 Census Volume 1, Chapter 1: U.S. National
Level Data, Table 32, Desktop Data Query Tool 2.0, accessed January 2015.
Galliformes, which include many of the commercially produced game birds (i.e. pheasant, wild
turkey, quail, partridge) are raised worldwide and there are many associations and organizations,
both public and private, which support the expansion of galliform breeding and preservation.
Galliformes include some of the most endangered birds in the world.77
After extensive research
efforts, the Contractor was unable to identify a reliable source of export and import data for the
U.S. game bird industry. The results of this research effort indicate some production data may
be obtained from the national and regional associations should an insurance development effort
be pursued. However, it should be noted these data are likely not collected by a uniform
methodology. It is anticipated that data by species and location are likely to be sporadic and, in
the case of some species, not appropriate for insurance.
76 USDA NASS 2012 Census of Agriculture, 2012 Census Volume 1, Chapter 1: U.S. National Level Data, Table 32, Desktop
Data Query Tool 2.0, accessed January 2015.
77 World Pheasant Association, https://www.pheasant.org.uk/home.aspx, accessed January 2015.
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SECTION III. STAKEHOLDER INPUT
The Contractor gathered stakeholder input during discussions with growers, integrators,
producers, producer organization representatives, insurance industry representatives, state and
federal legislators and their staff, extension agents, and USDA staff. See Appendix B, Exhibit 1
for a sample listening session agenda. The Contractor collected this input during ten listening
sessions focused on diseases in the four primary sectors of the poultry industry: broiler, layer,
turkey, and game bird. Of the ten sessions, six were conducted on site. Four were conducted as
teleconference listening sessions. Additionally, the Contractor conducted numerous personal and
telephonic conversations outside these more structured stakeholder input gathering activities.
The first on-site listening session was held in Atlanta, Georgia at the International Production &
Processing Exposition (IPPE), the largest trade meeting for the industry, on January 26, 2015.
Subsequent sessions were offered in St. Cloud, Minnesota, on February 3, 2015; in St. Paul,
Minnesota, on February 4, 2015; in Lancaster, Pennsylvania, on February 12, 2015; in Modesto,
California, on March 17, 2015; and in Okoboji, Iowa, on May 28, 2015. The teleconference
listening sessions occurred on February 17, 2015; February 18, 2015; March 24, 2015, and June
18, 2015. Most of the conversations outside these venues were held in conjunction with
organizing and conducting the listening sessions or in follow up as a result of a lead provided at a
listening session.
The Contractor contacted a total of nine grower associations in the four states through telephone
and email correspondence. The Contractor asked each grower group to convey listening session
invitations to their membership. The Contractor’s livestock segment specialist contacted more
than 200 individuals within the poultry industry to invite them to participate in the sessions.
Two weeks before the five initial on-site listening sessions the Contractor sent an RMA-
approved Press Release (Appendix B, Exhibit 2) to local papers and regional agricultural
publications. These advertisements and announcements were available to run for two weeks in
each region and contained a brief synopsis of the topic for the listening session. The press
releases also invited email communication directly with the Contractor concerning the research
topic. Additionally, the Contractor contacted university extension specialists in the four initially
targeted states and requested both their presence at the listening sessions and that they convey
the information to poultry producers with whom they worked directly.
Those who participated in the listening sessions were provided a very brief summary of the crop
insurance development process and encouraged to express their opinions concerning the
feasibility of insuring poultry for catastrophic disease events.
Atlanta, Georgia
The session in Atlanta was scheduled to coincide with the IPPE at the Georgia World Congress
Center. This annual exposition includes a gathering of more than 30,000 growers, integrators,
producers, extension personnel, lenders, and allied industry representatives and is based around a
trade show and a series of extension and education workshops. The Contractor was provided a
meeting room and signage was posted in various areas to encourage participation. Unlike the
other sessions at the conference, the listening session was intended to collect feedback rather
than to provide current information to industry stakeholders. The Contractor facilitated the open-
ended discussion with a large group of stakeholders representing the major poultry sectors. The
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Contractor conducted the listening session from 1:00 pm to 3:30 pm Eastern time on January 26,
2015. Thirty-six individuals attended this session, but only 26 provided any demographic
information. Two additional stakeholders arrived after the session had ended. Of the
participating stakeholders who provided demographic information, there were seven growers,
five veterinarians, four representatives of poultry producer associations, three representatives of
the chick sales industry, two representatives of the NPIP program, two third party auditors of the
poultry industry, one representative of a poultry integrator, one insurance representative, one
member of the media, and one representative of USDA APHIS. Stakeholders from 18 states
were represented at this listening session. This is the broadest stakeholder representation the
Contractor has experienced in recent years both by geography and stakeholder classification.
St. Cloud, Minnesota
The listening session in St. Cloud was held the day before the Minnesota Turkey Growers
Association Board of Directors meeting. The listening session was held in a meeting room at the
St. Cloud Holiday Inn & Suites with eight stakeholders attending. Of the eight stakeholders, five
provided demographic information on the sign-in sheet. Four of the attendees were producers
(two turkey producers, one egg producer, and one pheasant producer); one was from an
integrator for the layers sector; one was an insurance company representative; one was an
association representative representing growers, producers, and integrators; and one was the
Minnesota state veterinarian.
St. Paul Minnesota
The session in St. Paul was in addition to the contractually required listening sessions. The
session was scheduled in response to an invitation by the Minnesota Turkey Growers
Association Board of Directors for the Contractor to attend their meeting and discuss the issues
related to catastrophic poultry disease insurance. There were 12 board members present during
the discussion. Nine of the board members were independent producers of turkeys and the other
three were contract growers for integrators.
Lancaster, Pennsylvania
The session in Lancaster was held at the Farm & Home Foundation of Lancaster County on
February 12, 2015. The Contractor contacted both the PennAg Poultry Council and
Pennsylvania State University to advertise the session. Unfortunately, in spite of published
advertisements and contacts with a vibrant and diverse poultry community, the session was
attended by only one stakeholder from the PennAg Poultry Council.
Modesto, California
The session in Modesto was postponed as a result of an outbreak of HPAI just prior to the
scheduled meeting. The outbreak was in a commercial turkey flock in Stanislaus County,
California, the same county where the session had been scheduled. After speaking with producer
groups in California and APHIS representatives, out of an abundance of caution, the Contractor
recommended to USDA RMA that a postponement of the meeting would be prudent.
The rescheduled session occurred on March 17, 2015 at the Stanislaus County Harvest Hall.
Unfortunately, in spite of advertisements published online and in print and contacts with both
meet and egg association representative and extension offices, only a single producer
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representing a poultry layer cooperative attended the meeting. A representative from the RMA
Davis Regional Office also attended.
Okoboji, Iowa
The session in Okoboji was scheduled as a result of a contract modification to increase the
number of stakeholder sessions. Sessions were originally scheduled prior to the unprecedented
outbreak of HPAI. The limited response to the stakeholder session in California surprised the
Contractor since at the time of the session H5N8 HPAI had been identified in Colusa and Solano
counties in wild birds and in Stanislaus County in a large commercial flock. Since that time, the
HPAI outbreak has spread across much of the nation. At RMA’s request, the location of the
session was selected by Representative Steven King’s (Iowa’s Fourth Congressional District)
staff and the logistics of the session were handled by Representative King’s regional coordinator.
The congressman’s staff selected the Okoboji location because of the large number of
commercial poultry that had been lost or depopulated in proximity to the region. Twenty
stakeholders attended this session. In addition to the congressman himself and his program
coordinator there were two contract growers, an integrator’s representative, and eight producers,
two representatives of poultry associations, one RMA representative, and three insurance
company representatives. The remaining participants were Iowa state legislators. The session
was opened by Representative King at 2:00 pm. Following Representative King’s remarks,
producers were invited to provide comments about disease events and the responses from federal
agencies to those events. The floor was then opened to all attending. At the request of
Representative King, an RMA representative made brief remarks. The Contractor then provided
a brief overview of the contracted study. General discussion followed until approximately 4:00
pm. Additional one-on-one conversations continued for about an hour.
Teleconference Listening Sessions
The Contractor hosted four teleconference sessions in addition to the on-site sessions.
Participation in the first session on February 17, 2015 was by members of the Valdosta, Georgia
Regional Office of RMA. Participation in the second session on February 18, 2015 was by 18
stakeholders from the Delmarva region of the United States. This session was coordinated at the
request of the Delmarva, Inc. Executive Director, Bill Satterfield. The Contractor believes most
of those attending were contract growers. The third session was coordinated with the
encouragement of the Contractor’s livestock segment specialist and the poultry producer
associations in California and targeted the California layer sector. The California layer industry
is primarily located in southern California and the associations believed these stakeholders would
not, especially with the continued monitoring of HPAI in northern California, travel to the on-
site session in Modesto. Participation in the third session on March 24, 2015 was by a single
individual from the California poultry layer industry. Participants in the fourth session, held on
June 18, 2015, included three producers, four grower association representatives, two insurance
industry representatives, and four representatives of RMA. A spirited discussion focused on the
layer sector. The large extent of depopulation in this sector had increased interest in purchased
risk management for both mortality and business interruption resulting from catastrophic disease.
There was consensus that coverage for extensive losses was more important than coverage for a
specific disease (e.g., HPAI). This suggested a high deductible product would be acceptable to
the layer industry representatives participating in the session.
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C-SPAN provided a video (http://www.c-span.org/video/?327001-1/hearing-combating-avian-
influenza) of a Senate Homeland Security and Government Affairs committee hearing held early
in July 2015 focused on stopping the AI threat to animal and public health. The hearing was
chaired by Senator Ron Johnson, [R] Wisconsin. C-SPAN identifies speakers as U.S. Senators
Tammy Baldwin, [D] Wisconsin; Tom Carper, [D] Delaware; Joni K. Ernst, [R] Iowa; Ron
Johnson; Gary Peters, [D] Michigan; and Jon Tester, [D] Montana, as well as John R. Clifford,
Chief Veterinary Officer, USDA; Christopher Currie, Director of the Government Accountability
Office on Emergency Management and National Preparedness Issues; Jack Gelb, Director of the
University of Delaware-Avian Biosciences Center; Scott Schneider, President of the Wisconsin
Poultry and Egg Industries Association; Anne Schuchat, M.D., Director of the Centers for
Disease Control and Prevention; National Center for Immunization and Respiratory Diseases.
The senate website offers additional video perspectives of the hearing
(http://www.hsgac.senate.gov/hearings/stopping-an-avian-influenza-threat-to-animal-and-public-
health and http://www.ag.senate.gov/hearings/highly-pathogenic-avian-influenza-the-impact-on-
the-us-poultry-sector-and-protecting-us-poultry-flocks).
A second panel of witnesses included James R. Dean, Chairman, United Egg Producers; Ken
Klippen, President, National Association of Egg Farmers; Brad R. Moline, manager and owner
of Moline Farms LLC; Rob Knecht, President and Vice President of Operations, Michigan
Allied Poultry Industries and Konos, Inc. respectively; and Dr. Thomas Elam, President,
FarmEcon LLC represented a second panel of witnesses. Much of their testimony was presented
in written format. Links to PDFs of their testimony area available at
www.ag.senate.gov/hearings/highly-pathogenic-avian-influenza-the-impact-on-the-us-poultry-
sector-and-protecting-us-poultry-flocks.
The bulk of the testimony focused on APHIS, veterinary medicine, and biosecurity. Witnesses
stated that the strain of HPAI involved in the 2015 outbreak is not transmissible to humans. Dr.
Clifford emphasized that the outbreak did not pose any risk to food safety or public health.
However, from the perspective of the agricultural economy, testimony suggested it will take as
long as18 months to restore production of eggs to pre-HPAI levels. It was noted that about 85
percent of the hens and pullets lost as a result of these events produced breaking eggs. Turkey
growers lost an estimated $500 million during the outbreak while the layer sector lost $1.1
billion. The outbreak also affected export of meat from all industry sectors. USDA officials
indicated approximately half of the APHIS 2015 discretionary budget was spent addressing this
year’s HPAI outbreak. Dr. Clifford further testified that vaccination plays a crucial role in
prevention and control of HPAI, while Dr. Swayne noted vaccinations can suppress outbreaks
but not to eradicate HPAI.
The Contractor notes U.S. Representative Collin Peterson was quoted as the source of remarks
about disaster relief for farming operations hit by bird flu.78
In an associated audio clip,
Representative Peterson says APHIS indemnities seem to have been working well and is the
correct approach to indemnifying for mortality losses due to disease and government actions to
protect against those diseases. He indicates the insurance industry is not interested in “doing”
poultry disease insurance, and “we [unidentified] are looking at business interruption insurance
78 WNAX in Yankton, South Dakota, provided a summary of his comments yesterday (August 10, 2015),
http://wnax.com/news/180081-congress-considering-bird-flu-insurance-or-disaster-program/, accessed August 2015.
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contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
for disease and have asked RMA to look at that question.” The associated news report text
follows:
“Congress is working on some type of risk management or disaster program to
assist poultry producers hit by avian influenza. House Ag Committee Ranking
Member Collin Peterson of Minnesota says this was the worst animal disease
outbreak the U.S. has ever experienced and the virus may reemerge this fall. That
is why some type disaster program is needed. However, he says catastrophic
poultry insurance may not be the best option.
“Instead Peterson says a better option may be to look at insuring the lost income
from the time the flock is depopulated until producers go through sanitation,
certification and get birds back to market.
“He says the Ag Committees tried to include poultry insurance in the recent farm
bill, but it was stripped out for budgetary reasons”
U.S. Senator Al Franken’s office issued a press release about a statement he sent to USDA
Secretary Vilsack calling for the creation of an insurance program to help poultry farmers facing
avian flu. In this statement, Senator Franken indicates: “the Department of Agriculture is calling
for an insurance program to help protect poultry producers.”79
Themes Raised During Listening Sessions
The following comments gleaned from the listening sessions are categorized by theme. The
Contractor identifies from the segment of the industry represented by the commenter accordance
with the following descriptors:
A = Association Representative
C = Company or Integrator Representative
E = University Extension Representative
G = Government Representative
I = Insurance Industry Representative
P = Producer or Contract Grower
V = Veterinarian Representative
Theme 1: Potential Interest in a Catastrophic Disease Insurance Program
Is the insurance program contingent on depopulation? (V)
This seems to be a pretty large bite to take. Can we start with something smaller – 5 or 6
diseases that affect us all and get going from there? (A)
The number one concern with the turkey industry for many years has been the lack of
effective antibiotics. (P)
I don’t want to be compared to people who can use antibiotics that I cannot. (P)
Is it feasible to sub-divide just like the grain farmers do when they divide wheat and oats?
(P)
If you want to start with something smaller, it would probably be the turkey industry, but
that would also be the hardest to extrapolate to the other groups. (V)
79 http://www.franken.senate.gov/?p=press_release&id=3213, accessed August 2015.
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Those current indemnity programs from APHIS are for specific diseases and payment
depends on participation in the NPIP program. (V)
The APHIS program is very specific in regards to covered diseases but the program will
cover pheasants, upland game birds, broilers, turkeys, etc. (V)
In the past, the industry has always managed itself through these events. Back in the
early 80’s, there was AI out in Pennsylvania. There were some people who took it in the
shorts, but the industry thrived through that. The same can be said with PED (Porcine
Epidemic Diarrhea) last year. Why does the government want to step in and take away
that automatic management tool of the economics of the industry? (P)
Again, in the past, the industry has always managed itself through these challenges, and it
is probably a healthier industry today because of that. So wouldn’t it be better to stop the
government from coming to help? (P)
I think that the market has managed to sort itself out pretty well so far, and some may feel
pain, but the others will enjoy a short period of time where they benefit. The party who
had that pain will either learn from it or be out of business. (P)
One fear I have, is that any time the government gets involved in something, if they are
going to put money into crop insurance – or turkeys – they are going to tell us what to do.
(P)
There would have to be guidelines to the insured for what to do if they suspected that
they would have a claim. (P)
It [catastrophic disease coverage] is something I would be interested in. (P)
You vaccinate according to integrator requirements (P)
You vaccinate according to APHIS requirements (V)
The vaccines are being pulled so the growers and producers can’t follow historical
procedures (V)
Good practices keep your losses down. (P)
Disease outbreak is something that we talk a lot about – what as a state are we going to
do? We need to be prepared. (A)
Farm Credit Financial Institutions…where you are required to have farm insurance. I
wonder if that would be an option – if they would require something like that with their
annual payments. (E)
We ought to have a catastrophic disease program for avian influenza. (P)
I would be interested in [a catastrophic disease] insurance program. (P)
We would be interested in an avian influenza [insurance product]. (C)
We need insurance to deal with a crisis like this. (P)
We are facing a decision about whether or not to restock our barns if and when we are
permitted to do so. Without some form of disease insurance, I cannot allocate the capital
to do so. (P)
I don’t know what would be called catastrophic if the current avian influenza outbreak
isn’t. (P)
Commercial insurance [for mortality] is no longer available. Offers have been
withdrawn. (I)
We need business interruption insurance, not disease coverage. (P)
We would definitely be interested depending on premiums (P)
I wouldn’t give up disaster payments to get insurance.(P)
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Theme 2: Industry Contracts
There are contracts that have the owners of the birds entirely assuming the risk and
contracts where owners of the facilities assume a portion of the risk and everything in
between. (P)
In the broiler industry, are there broilers owned by individuals or companies that function
under a contract that does not allow the rise and fall of the market to influence what they
get for revenue? If they [integrators] have total ownership of the bird, are there a few that
are taking all the risk and aren’t taking any market participation? Because that’s what we
have in our industry. Those few of us independents that are left...we share all the risk,
but we are on a set contract. (P)
In the turkey industry here, the growers still own the birds, buy the poultry from Jenny-O
at a subsidized rate, pay for all the feed, and buy all the medication. The grower,
however, has no control from where he gets his feed, Jenny-O makes the management
decisions, and the grower is on a set contractual price for managing those turkeys.
I don't have a problem with total ownership, but there has to be extra money in there for
when that catastrophic loss happens. But it would be pretty tough to sort out. (P)
We could amend our contracts so that the growers would have to have catastrophic
disease insurance as a requirement for us to have a contract with them. (C)
I will see if I can get you a [turkey] grower’s contract. (C)
Theme 3: Disease Risks the Producers Encounter in Their Operations
Highly Pathogenic Avian Influenza (P), (C)
Blackhead in turkeys (P)
Avian Influenza – low path, high path (P)
Salmonella enteritidis (P)
Newcastle Disease (P)
Fowl Cholera (P)
Rio-Virus (P) [Reoviral Tenosynovitis]
Let’s use Cholera as an example, if you have a claim – the process starts, and then I
assume you have to send something to a lab, and then treatment, and then do you
accumulate dead birds…go by the honor system…or what? It gets really complicated.
(P)
New imported disease (V)
Avian Metapneumovirus (P)
I remember avian influenza on our farm in 1970’s, it really decimated our flocks. (P)
High path AI will travel across the country in a “W” so it’s only a matter of time before
what’s happening in California comes here. (V)
The Metapneumovirus came through in 1980’s. (P)
We realized that biosecurity is a huge thing to be concerned with. (A)
I know that people are very aware of the potential threat that the live bird market poses to
those that are growing birds from an integrator standpoint.(A)
Another thing – back yard birds – the increased incidents of back yard birds popping up.
Neighbors could have back yard birds that could interact with a producer’s commercial
flock. (A)
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The flock of birds that is depopulated – the farmer is paid about 20 percent of what he
would have made if he had sold them. (V)
An affected AI farm – real numbers – is probably going to lose about a third of his annual
income. (V)
The “wrong time, wrong place” farms who have never had AI, but they are a quarter of a
mile to a mile away from the guy who does...and depending on their cycle of production,
they may not get chicks replaced for two to ten weeks, or in an ongoing event, for about
six months. So those are the guys who need business interruption insurance. A grower,
on average, gets about five chicken flocks a year in the case of meat broilers, so every
flock he misses is 20 percent of his annual income. (V)
We’ve had an avian influenza event one time in 30 years that I’ve worked here. (V)
I think AI is at the top of the list, but I think a better way to say it would be with
quarantinable diseases, a grower is in a quarantine zone and that inhibits their business.
(V)
Exotic Newcastle Disease (V)
There is a remote possibility of an agro-terrorism event. Purposeful introduction of
economic disease problems for agriculture. (V)
I would agree with the point that any infectious, contagious disease with a high
morbidity/mortality should be included in such insurance if such insurance would be
pursued as opposed to limiting it to one disease. (V)
With AI – it’s not a big or small bird producer issue – it affects everybody...what we have
learned is that there can be people that fall outside of NPIP but don't fall into any group
[integrator, contract grower, or producer]. (C)
Theme 4: Types of Insurance Programs that Would Interest Them
We ought to have a catastrophic disease program for avian influenza. (P)
I would be interested in [a catastrophic disease] insurance program for avian influenza
and Newcastle Disease. (P)
We would be interested in an avian influenza [insurance product]. (C)
We need insurance to deal with a [APHIS-ordered taking] crisis like this. (P)
Would insurance be on specific diseases or on widespread disease events? (A)
Business interruption insurance seems more important to our customers. (I)
You can buy business interruption insurance now but not for disease. (P)
Which kinds of insurance do we want to have? Specific coverage, coverage in general?
(I)
Would people insure for just one disease in certain cases? (P)
There are some property – casualty kind of insurance coverages where there will be a
fixed-dollar deductible and then some kind of a co-insurance percentage for a secondary
dollar amount. (I)
I would be interested in revenue coverage comparable to the revenue coverage available
for commodity crops. (P)
We haven’t had any contact with the poultry and would not know enough to comment on
it. (G)
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The two different components of poultry here is the value of what is in the houses
growing at the time of loss, and from a producer aspect, the labor and housing and other
input costs, but also the income loss on their behalf. (C)
I have heard that there is income protection insurance available for chicken growers. (P)
There is Whole Farm Revenue Protection – a sort of umbrella insurance policy but, if
more than 35 percent of your revenue income came from the poultry, it knocks you out of
the policy. (I)
It seems like this is for a more diverse farming operation with many different crops that
don’t currently have an MPCI crop insurance policy for them. (I)
Many people’s sole income is poultry, and I raise my eyebrows when I hear that there is
something that covers a diversified farm that has other income, but nothing under the
Farm Bill for those of us whose sole income is raising poultry. (P)
I’ve experienced two events in fourteen years where I had insurance to cover the natural
event (fire) for income protection but have not found insurance which covers disease. (P)
There are some catastrophic loss policies that can cover named perils including disease
selected by the insured. These can include disease catastrophes. They can also include
business interruption coverage following a loss. However, not too many [producers,
contract growers, integrators] inquire about the catastrophic disease coverage or the
business interruption coverage. (I)
Couldn't you do two tiers – like if you only want AI protection, the premium is this much,
and if you want all quarantinable diseases, the premium is this much? (C)
So part of our concern with the various AI outbreaks – which are all surrounding our
operations – is that it is affecting our export business tremendously and that’s a problem.
(C)
We need business interruption insurance not disease coverage. (P)
[Insurance would be better than] APHIS changing its rules every day. (P)
It would be nice to know how much you are going to get [for each bird] up front. (P)
We need a “stamp out’ program like in California that pays [when you depopulate]. (P)
The deductible needs to be smaller [for poultry than for field crops]. (I)
Quarantines are an important part of the control [of an avian influenza outbreak]. (P)
Heat Prostration and diseases like Highly Pathogenic Avian Influenza can be
catastrophic. (P)
Business interruption and the high costs of getting back into business. (P)
Different types would require different indemnities. (A)
I would be interested in a named peril policy. (P)
The insurance would need to cover the birds and the eggs [that won’t be produced]. (P)
Input into the operation needs some sort of coverage. (P)
Theme 5: What They are Willing to Pay to Manage the Risk
With the program for NPIP, the government determines the value of the birds for each
incident. Will they follow the same philosophy for this insurance? (P)
Would have to have different insurance premium rates based on value of the bird. (P)
If I am comfortable in insuring my grandparent flock at, say $85 per bird, what difference
would it make to the government? Why would it be so hard to set up a policy like this
scenario? (P)
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In our industry, it would be very difficult to set a price. (A)
How do you place a value on something that you cannot replace? Loss of a bloodline, for
example. (P)
Could we get down to basic premiums based on past experience like with crop insurance?
(I)
If they could insure for a certain [fixed] dollar amount, it would be good. (P)
Or on a schedule based on age … a declining indemnity based on age. (I)
I don't think that a producer could handle a catastrophic crop or livestock insurance
without that subsidy. (P)
What would you would think it would be acceptable loss in order to collect
insurance?…everything has a deductible. (P)
Well, it would be an amount equal to what the policy holder could absorb that would
require a balance sheet or the ability for low-cost credit to cover that deductible. (I)
So, then, would it be on a dollar basis or a percentage basis? (P)
My guess is that it would migrate to a dollar basis. (I)
I would be interested in a product that was built off the Urner Berry price reports. (P)
Nationwide [insurance] has gone astronomical- we saw a 24 percent increase on our farm
this year- and yes…they might possibly cover chickens that were flooded. Any type of
income coverage that would cover loss is limited and very costly, and I can tell you that
from personal experience. (P)
The deductible needs to be smaller [for poultry than for field crops]. (I)
The [Animal Health Protection Act of 2002] doesn’t really cover losses. (P)
Theme 6: Perceptions of Any Potential Conflicts or Difficulties
What constitutes catastrophe? (P)
Is the intent to insure the interest of the person who owns the birds or the person who
owns the facilities, or both? (P)
We looked into this five to six years ago and couldn’t get any data through USDA
[APHIS] etc… (I)
Another difficulty was separating the discussion between indemnity insurance and
business interruption. (I)
If we don’t have these diseases commonly, how would we get the data? (I)
Not aware of any of the commodity groups on the poultry side that keep anything close to
that kind of data. (A)
How do you make sure that offering insurance doesn’t increase the risk taking of other
people in the industry that might affect me? (P)
So the law would have to change to allow insurance for contract growers. (P)
I am concerned about attracting bad players into the turkey business as a result of
offering insurance. How do you keep bad players from getting paid from the insurance
when they shouldn’t be in the business in the first place? (P)
This could be a real can of worms in the livestock industry. I can see the same problems
in livestock insurance as in crop insurance. (P)
Unlike in crop insurance, if my neighbor does a bad job raising turkeys – gets a disease
and mismanages them to get an indemnity payment – I may pay severely for that. (P)
It would be easy to prove a loss. (I)
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In a disease event, – sometimes our industries are dependent on exports quite heavily –
with an event, it can affect the whole industry even though the producer keeps free of the
disease, the marketing of their product would be affected. Will the insurance take that
into consideration? (P)
Right now there is no monitoring of the producer operation side of bird management. We
need to monitor them more regularly instead of when they first come into the market. (A)
We studied this several years ago and discovered there were obstacles which we could
not overcome: first, the growers don’t own the birds; secondly, the frequency and
severity data just isn’t available so there was no way to assign risk. (A)
Not just the AI affected population is affected by the quarantine but usually an area is
zoned so that a grower who is in that AI zone cannot put birds back in until everything is
zero tolerance. So that grower can be out for months, maybe even half a year without
any kind of production. No fault of their own, but that they happen to be in that zoned
area. (P)
You still have the insurable interest hurdle to overcome. The Whole Farm Revenue
Protection product gives a double whammy to chicken growers by limiting the revenue to
35 percent from livestock which the insured has an insurable interest in and which the
insured is not an animal contract grower. (I)
It seems as though the law has to be re-written or changed to get a product like the one
we are talking about. (C)
Interstate commerce ought to be controlled when there is [a catastrophic disease]
outbreak.
Vaccines might be useful for layers, but they would have a negative impact on hatcheries.
(P)
The USDA [Food and Nutrition Service] inspector had a backyard flock, but he still came
into my [poultry] house in spite of my objections. His supervisor said there was nothing
in the regulations that would allow me to prevent his coming in. (P)
Composting the [dead] birds creates more chance of infection in other flocks. (P)
APHIS makes you wait to depopulate until the tests come back. That increases the
chances of the disease spreading. (P)
Broilers might be more immune [to avian influenza] compared to layers. Turkeys would
be in between. (P)
The [Animal Health Protection Act of 2002] doesn’t really cover losses. (P)
There is not enough private insurance capacity to cover catastrophic events like the
current influenza losses. (I)
I have many other bird operations near mine. That increases my risk. (P)
I wouldn’t give up disaster payments to get insurance. (P)
Funding for different [federal] government programs might be in conflict. (A)
We wouldn’t let disaster payment get cut to pay for insurance. (A)
There might need to be changes to the Standard Reinsurance Agreement. (I)
Multiple benefits [from insurance and disaster programs] would be limited so there would
be no [beneficial gain]. (G)
Different types would require different indemnities. (A)
I can already get (provide) coverage for everything except disease and heat (P) (I)
No coverage is [currently] available for catastrophic losses. (I) (P)
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Theme 7: What is Considered Catastrophic?
If “catastrophic” is something that is cutting production instead of actually killing birds, it
might not be something that we want not to insure against because cutting back
production might be good for prices for the rest of the industry. (P)
Loss of revenue not loss of birds is catastrophic. (P)
A disease that causes loss of weight could be catastrophic. (P)
Catastrophic is when birds are dying behind you as you walk through the flock. (P)
Say that there is one farmer that raises a million birds and has to put their whole flock
down – would that qualify as a catastrophic loss? (A)
Widespread might not be a great way to characterize the losses because one flock is very
large and might be catastrophic to the owner and the company responsible. (V)
So catastrophic doesn’t have to be widespread. (V)
[APHIS] offered a calculation that started at $12 per layer, but after their deductions they
paid about $1 a bird. That makes this a catastrophe. (P)
I lost thousands of full grown turkeys one day before delivery. Do you know what
composting that amount of turkey smells like? (P)
I lost more than a million layers in one house. (P)
I lost [all the birds in] every house. (P)
Business interruption is the real catastrophe. (P)
I got a 100 percent score on my APHIS bio-security evaluation and six weeks later had to
depopulate. (P).
When you have this many [poultry catastrophic disease] deaths the air is full of [inocula].
(P)
I lost more than 4 million birds. (P)
A million turkeys have been diverted [by depopulation] from our plant. (C)
12 percent of layers and more than 30 percent of layers in breaking egg operations have
been depopulated. (P)
High end losses to the bottom line are what are catastrophic, not the cause of the loss. (P)
A catastrophe in a mega-operation will be different from one in a typical operation. (I)
If there is a single facility, depopulation has a greater effect than if there are multiple
facilities, especially if those operations are in different counties (states). (P)
Heat Prostration and diseases like Highly Pathogenic Avian Influenza can be
catastrophic. (P)
Business interruption and the high costs of getting back into business. (P)
The current [HPAI] events have been catastrophic. (P)
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SECTION IV. EXISTING PROGRAM REVIEW
In this section the Contractor provides information regarding programs offering financial support
for the poultry industry identified during the course of the project. The Contractor reviewed
programs offered through the Federal government, state governments, and from the private
insurance industry. Numerous support programs are available from governmental agencies,
although the Contractor found the risk management products exclude many poultry industry
stakeholders. The Whole Farm Revenue Protection (WFRP) Pilot Program specifically excludes
contract growers, operations with large gross revenues, and operations whose primary revenue
source is livestock (including poultry). Furthermore, WFRP currently is not available in large
geographic areas including counties and states with substantial poultry production. WFRP may
be available and useful for smaller, diverse operations with poultry production. This could
include some niche market operations. APHIS provides compensation to the owner of the
poultry for animals the government destroys as part of the service’s disease control programs
(“takings”). Payments are not made for disease related death, only for animals destroyed
(depopulation). The APHIS compensation is only available to owners of the birds taken (i.e.,
producers, integrators and contract growers who have an ownership interest in the birds they
raise). The compensation addresses lost costs, but not total lost value. This contrasts
significantly with most crop insurance which compensates the insured for total lost value (based
on historical averages) less a deductible. Private catastrophic loss coverage is available for
poultry operations. At least one U.S. and two international companies will consider covering
catastrophic disease losses under these policies. However, it should be noted the premiums,
which are calculated on a one-off basis, have been described by both producers and insurance
industry stakeholders as prohibitive. Furthermore, APHIS procedures may limit APHIS
payments for takings when compensation for value from takings is provided by private
insurance. Details of the various support programs available to poultry industry stakeholders
follow.
Federal Programs
Federal programs supporting poultry producers and growers are offered primarily by agencies
and services of the USDA. USDA programs supporting poultry producers are described by the
agencies or services within the USDA offering the program. These agencies and services are
listed alphabetically.
Agricultural Marketing Service (AMS)
Poultry growers benefit from general services of AMS including the following programs:
The Agricultural Analytics Division: Provides economic, scientific, statistical,
mathematical, and market analysis.
The Country of Origin Labeling Division: Ensures that poultry sold at retail are labeled
by their country of origin (COOL). The recent World Trade Organization ruling
regarding COOL labeling for beef may force changes in this program.
The Food Safety and Commodity Specification Division: Develops and maintains
specifications for poultry and eggs purchased by USDA for distribution through the
various Federal food and nutrition assistance programs. Relevant standards include:
o Poultry Carcass Grading and Standards (AMS 70.200 et seq.)
o Egg Grading and Standards (AMS 56, 7 CFR Part 56, 7 CFR Part 57)
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Grading Division, Poultry Program: Monitors the Shell Egg Surveillance Program. Shell
eggs that are not of the best quality for human consumption are called “restricted eggs.”
Restricted eggs include checked eggs, dirty eggs, leaking eggs, incubator rejects, and
inedible eggs. The program also provides mandatory procedures for the disposition of
restricted eggs. The Shell Egg Surveillance Program limits the number and types of
restricted eggs permitted in consumer channels and specifies the approaches appropriate
for different restricted egg types.
The Livestock, Poultry and Grain Market News Division: Collects price and volume
information for the sale and purchase of poultry and eggs reported in the Weekly
Livestock, Poultry, & Grain Market Highlights.
The Quality Assessment Division: Develops and maintains Federal standards for egg and
poultry quality and nomenclature. Participates in development of national and
international standards.
The Research and Promotion Division: Oversees industry-funded egg research and
promotion programs, commonly called the checkoff programs.
Animal Protein Free Certification Program (APFC): This program provides third-party
verification that poultry have never been fed animal protein, animal fats, or animal by-
products.
Animal and Plant Health Inspection Service (APHIS)
APHIS is responsible for protecting and promoting U.S. agricultural health, administering the
Animal Welfare Act, and carrying out wildlife damage management activities. APHIS has been
tasked with greater responsibility for enforcing the obligations of the United States under
phytosanitary rules such as the Codex Alimentarius and responds to other countries’ animal and
plant health import requirements and assists in negotiating science-based trade restrictions.
The NPIP is the major program addressing poultry diseases, including catastrophic diseases. The
NPIP coordinates programs aimed at monitoring and, to the extent possible controlling, avian
influenza, fowl typhoid, Mycoplasma meleagridis, Mycoplasma gallisepticum, Mycoplasma
synoviae, Salmonella enteritidis, and Salmonella pullorum. Participation is voluntary, but flocks,
hatcheries, and dealers must qualify as “U.S. Pullorum Typhoid Clean” before participating in
any other program. The NPIP currently addresses commercial poultry such as chickens (broilers
and layers), turkeys, and waterfowl, as well as exhibition poultry, backyard poultry, and game
birds. The Contractor did receive some anecdotal evidence while gathering stakeholder input
that some smaller poultry producers consider NPIP is “not for them.” The program is expensive
and requires a level of infrastructure and staffing that does not fit well into a small business
model.
APHIS, under authority of the Secretary of Agriculture granted by the Code of Federal
Regulations, Title 9: Animals and Animal Products, Chapter I: Animal and Plant Health
Inspection Service, Department of Agriculture, has been given the task of responding to poultry
disease outbreaks. APHIS may seize, quarantine, and, if necessary, order the destruction of
poultry affected by any one of several identified diseases. Furthermore, the Secretary of
Agriculture has authority to ascertain the value of animals destroyed and provide compensation;
this task has also been assigned to APHIS. The poultry diseases named in 9 CFR are Newcastle
disease, HPAI, and chlamydiosis. APHIS relies heavily on the NPIP program standards as the
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foundation of their poultry disease monitoring activities.80
One of the constraints on APHIS
programs compensating owners is that payments are generally limited to those animals alive at
the time a (Veterinary Service) VS 1-23 form is submitted to APHIS. Confirmation of infection
is required for submission. Consequently, animals lost to the disease prior to submission of the
VS 1-23 to APHIS are generally not covered under the compensation program.81
Other APHIS programs important to the poultry industry include:
Animal Welfare,
Import and Export Services:
o Animal and Animal Product Import and Export Information,
o International Trade,
o Sanitary and Phytosanitary Management (Trade Facilitation),
Veterinary Services:
o Animal Diseases by Species,
o Animal Health Report,
o Laboratory Information and Services,
o Monitoring and Surveillance,
o Professional Development Training,
o Veterinarian Accreditation,
o Veterinary Biologics,
o Veterinary Services Process Streamlining (VSPS),
o Veterinary Services, Office of the Chief Information Officer (VS OCIO), and
Wildlife Service.
Cooperative State Research, Education, and Extension Service (CSREES)
CSREES is the Federal administrative authority for the State Land Grant Agricultural
Experiment Stations and the Cooperative Extension Service. Extension and education programs
provide important educational and consultancy resources for producers in all areas, including
poultry producers.
CSREES funds research leading to the development of vaccines to fight poultry diseases. Recent
CSREES-funded research has addressed Avian Influenza,82
Avian Pathogenic Escherichia coli
(APEC),83
and Marek’s disease.84
80 USDA, APHIS, Veterinary Services, August 2014, National Poultry Improvement Plan Program Standards,
http://www.poultryimprovement.org/documents/ProgramStandardsAugust2014.pdf, accessed April 2015. 81 USDA, 2015, HPAI Outbreak 2014-2015 Indemnity Procedures,
http://www.aphis.usda.gov/animal_health/emergency_management/downloads/hpai/indemnity_procedures.pdf, accessed July
2015. 82 Cardona, C., R. Slemons and D. Perez, 2009, The prevention and control of avian influenza: The avian influenza coordinated
agriculture project, Poultry Science 88: 837-8, http://ps.oxfordjournals.org/content/88/4/837.full#xref-fn-1-1, accessed
January 2015. 83 World poultry, 2008, CSRESS funding poultry vaccine development,
http://www.worldpoultry.net/Home/General/2008/9/CSRESS-funding-poultry-vaccine-development-WP002891W/, accessed
January 2015. 84 Stacy Kish, CREES, 2008, Chicken Genome Leads to New Vaccine to Fight Poultry Disease,
http://www.nifa.usda.gov/newsroom/impact/2008/nri/pdf/chicken.pdf, accessed January 2015.
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Economic Research Service (ERS)
ERS provides data and analysis on poultry product supply and demand, as well as information on
industry structure, pricing, trade, farm policies, production systems, and processing. ERS reports
of particular interest include:
Animal Production and Marketing Issues Briefing Room,
Livestock, Dairy, and Poultry Outlook: Tables,
Livestock and Meat Trade Data, and
Meat Price Spreads Data.
Farm Service Agency (FSA)
The Farm Service Agency (FSA) provides financial assistance to assist producers facing losses
from natural disaster (i.e., drought, flood, fire, freeze, tornadoes, pest infestation, and other
“calamities”). FSA’s Noninsured Crop Disaster Assistance Program (NAP) provides payments
to producers of non-insurable crops when low yields, loss of inventory, or prevented planting
occur due to a natural disaster. Eligible producers include landowners, tenants, or sharecroppers
who share in the risk of producing an eligible crop. The annual gross revenue of the eligible
producer cannot exceed $2 million. The natural disaster causing the loss must occur before or
during harvest and must directly affect the eligible crop. There is a requirement that disaster
caused by weather, earthquake, volcano, or flood be declared or that losses result from disease or
insect infestations arising because of such a declared disaster.
In the 2014 Farm Bill, FSA’s Supplemental Revenue Assistance Payments (SURE) Program
underwent some modifications. Four disaster programs were extended indefinitely: Livestock
Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), Emergency Assistance for
Livestock, Honeybees, and Farm-Raised Fish (ELAP), and Tree Assistance Program (TAP).
Furthermore, the 2014 Farm Bill removed the requirement that producers purchase crop
insurance or NAP coverage to qualify for these payments. Of these programs, only LIP and
ELAP apply to the poultry industry.
The Livestock Indemnity Program (LIP) provides “benefits to livestock producers for livestock
deaths in excess of normal mortality caused by adverse weather. In addition, LIP covers attacks
by animals reintroduced into the wild by the federal government or protected by federal law,
including wolves and avian predators. LIP payments are equal to 75 percent of the market value
of the applicable livestock on the day before the date of death of the livestock as determined by
the Secretary.” 85
Eligible poultry for this program include broilers, pullets, chicks, layers,
Cornish hens, ducks, ducklings, geese, goslings, and turkeys. Those whose average adjusted
gross income is greater than $900,000 are ineligible for payment under this program. This
program does not provide compensation for death resulting from disease.
Poultry producers may also qualify for disaster payments under ELAP. ELAP provides
emergency assistance to eligible producers of livestock (including contract poultry growers),
honeybees and farm-raised fish. “ELAP covers losses due to an eligible adverse weather or
eligible loss condition, including blizzards, disease (including cattle tick fever), water shortages
85 USDA, FSA, Program Fact Sheets, April 2014, Livestock Indemnity Program,
http://www.fsa.usda.gov/FSA/newsReleases?area=newsroom&subject=landing&topic=pfs&newstype=prfactsheet&type=detai
l&item=pf_20140415_distr_en_lip.html, accessed April 2015.
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and wildfires, as determined by the Secretary, that occurs on or after Oct. 1, 2011.”86
The
payments for death losses are the only benefit for which poultry is eligible to participate.
Eligible loss conditions for this program do not include death losses associated with disease.
Food Safety and Inspection Service (FSIS)
The Food Safety and Inspection Service (FSIS) is the agency responsible for ensuring the safety,
wholesomeness, labelling, and packaging of the commercial supply of meat, poultry, and egg
products. Both the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act
(PPIA) require the Secretary of Agriculture to consult with an advisory committee before issuing
product standards, labeling changes, or statements on matters affecting Federal and state meat
inspection programs.87
The National Advisory Committee on Meat and Poultry Inspection
(NACMPI) was created to serve that end, and FSIS employees are responsible for scheduling
and facilitating the work, actions, and meetings of the committee. Agency employees also
identify, assess, and define emerging and standing issues affecting procedures, policies,
activities, or resources for consideration by the committee.
Foreign Agricultural Service (FAS)
Poultry growers benefit from FAS general services and programs. Due to the growing
importance of foreign markets to the poultry sectors, FAS export development and promotion
programs are of particular importance. The FAS poultry data includes:
Dairy, Livestock and Poultry Division (DLP),
Data series, analysis of world markets, buyer lists, etc., and
Export Program Data.
National Agricultural Statistics Service (NASS)
NASS is the primary data collection and publication service of the USDA. Its continuous,
consistent data series are widely used by producers and researchers. Some poultry industry data
are collected and summarized by NASS. The two principal data collection approaches are
census and survey. All commercial producers are expected to respond to the census
questionnaires which are distributed every five years. NASS extrapolates from survey responses
to report state and national poultry data.
Risk Management Agency
The WFRP Pilot Program provides a risk management safety net for essentially all revenue on
the farm under one insurance policy. WFRP replaces the previous Adjusted Gross Revenue
(AGR) and Adjusted Gross Revenue-Lite (AGR-Lite) policies. This new insurance plan is
tailored for any farm with up to $8.5 million in insured revenue. Due to the effective deductible
in the coverage level, the total gross revenue of the insured operation can be larger. WFRP is
available for farms with specialty or organic commodities (both crops and livestock), or those
marketing to local, regional, farm-identity preserved, specialty, or direct markets.
86 USDA, FSA, 2014 Farm Bill Fact Sheet, November 2014, Emergency Assistance for Livestock, Honeybees, and Farm-Raised
Fish Program (ELAP) – Livestock Assistance, http://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/Disaster-
Assist/elap_livestk_fact_sht1114.pdf, accessed April 2015 87 USDA, FSIS, 2015, FSIS History, http://www.fsis.usda.gov/wps/portal/informational/aboutfsis/history/history, accessed April
2015.
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WFRP is designed to meet the needs of highly diverse farms that are growing a wide range of
commodities, and for farms selling commodities to wholesale markets. The WFRP policy was
specifically developed for farms that tend to sell to direct, local or regional, and farm-identity
preserved markets and grow specialty crops and animals and animal products. All commodities
produced by the farm are covered under WFRP except timber, forest, and forest products, and
animals for sport, show or pets.
The insured must have filed five consecutive years of Schedule F (or equivalent) tax forms as the
same tax entity; unless an appropriate change in the tax entity is approved by the insurance
provider under the terms of the policy. The farm operation will be ineligible for insurance under
this policy if expected revenue from animals and/or animal products is more than $1 million or
35 percent of the total expected revenue or if the operation derives more than 50 percent of
allowable revenue from commodities purchased for resale.
The amount of farm revenue a producer can protect with WFRP insurance is based on the lower
of the revenue expected on the current year’s farm plan or the producer’s five-year historic
income adjusted for growth. WFRP provides whole-farm revenue protection coverage levels
from 50 to 85 percent of insured revenue described above. These coverage levels are available
in 5 percent increments and a farm must have diversification of at least three (3) commodities, in
order to qualify for the 80 and 85 percent coverage levels.
At the end of the insurance period and after the insured has filed farm income tax forms for the
insurance year, a loss adjuster will complete an Allowable Revenue and Allowable Expense
Worksheet for the insurance year using the insured’s farm tax forms. The allowable revenue will
be adjusted for inventory adjustments, unharvested or unsold production, and production lost for
uncovered causes of loss to determine the revenue-to-count for the year. A loss is paid when the
total revenue-to-count for the insurance year falls below the insured amount of revenue,
multiplied by the expense reduction factor, if applicable.
There are limits and qualifications under WFRP that may impact a poultry operation. First, the
operation will not qualify for WFRP if: “The expected revenue from animals and animal
products on the farm is greater than $1 million or more than 35 percent of the expected revenue
as determined on the sales closing date.”88
“Animals” is defined in the WFRP Pilot Handbook:
as: “living organisms other than plants or fungi that are produced or raised in farm operations,
including, but not limited to, cattle, horses, swine, sheep, goats, poultry, aquaculture species,
bees, and fur bearing animals. For the purposes of WFRP, animals must be propagated or reared
in a controlled environment.”89
[emphasis added]
In addition, the following are excluded from the allowable revenue in each year of the whole-
farm history period, expected revenue for the insurance year, and revenue-to-count for claims:
88 USDA, RMA 2015, Whole Farm Revenue Protection Pilot Handbook: 2015 and Succeeding Crop Years (FCIC 18160-1 (01-
2015), page 10. 89
Ibid., page 78.
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“Revenue from commodities in which the insured does not have an insurable interest;”
and
“Revenue earned as an animal contract grower”90
[emphasis added]
Contract grower means a person retained under contract to manage the growth of a commodity
owned by another person. A contract grower in the case of large poultry operations is considered
the “grower.” For instance, large poultry companies, commonly called integrators, contract with
independent farmers, commonly called growers, to raise birds until ready for processing. The
grower provides the facility and the labor, and then cares for the poultry until the birds are ready
for processing and are picked up by the integrator. The revenue earned by the “grower” in these
cases is excluded from the WFRP program. WFRP is available in most states as shown below:
Figure 1. Whole Farm Revenue Protection Pilot Area
Source: http://www.rma.usda.gov/policies/2015/wfrpareamap.pdf, accessed July 22, 2015.
Rural Business–Cooperative Service (RBS)
RBS is a small agency with limited funding and staff whose purpose is to finance and facilitate
development of small and emerging private business enterprises, and promote sustainable
economic development in rural communities.91
While this agency could potentially serve
poultry growers and integrators, the industry structure will limit the impact of RBS services to
many producers.
90
Ibid., page 20. 91 USDA, Rural Development (RD), 2015, About RD, http://www.rd.usda.gov/about-rd, and Rural Business–Cooperative
Service, http://www.rd.usda.gov/about-rd/agencies/rural-business-cooperative-service, accessed April 2015.
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contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Environmental Protection Agency (EPA)
Poultry operations are affected by EPA rules administered primarily by the Office of Water
Management under the heading “Animal Feeding Operations” (AFO). Relevant reports may be
found through linked topics such as water, waste, and waste management and by reviewing the
EPA Website for AFOs (http://www.epa.gov/oecaagct/anafoidx.html). The rules regulate the
discharge of pollutants from point sources to waters of the United States. As a point source,
some operations require a National Pollutant Discharge Elimination System (NPDES) permit.
Application for the permit includes development of a nutrient management plan ensuring litter is
properly managed.92
Many stakeholders expressed concern that EPA regulations introduce
economic barriers to profitable management of poultry operations.
State Government Programs
State programs and regulations affect poultry production. State statutes or codes generally define
an administrative office and/or an administrator responsible for licensing and enforcing
minimum husbandry, sanitary, and environmental standards for poultry operations. Some states
have poultry regulations that replace or complement Federal sanitary or environmental standards.
The various regulations are similar to Federal standards, often referencing them as minima. The
purpose of these regulations is to reduce risks of animal diseases and contamination of poultry
products.
The USDA NPIP often functions as a centerpiece of most state efforts. Activities,
responsibilities, and regulations of state agencies include inspection of poultry flocks and chick
hatcheries, issuing inspection certificates, and overseeing rules and regulations for the
movement, sale, labeling, and advertising of all chicks, eggs, and poultry produced by flocks and
hatcheries. Code sections relating to the movement of birds address health issues, particularly
disease prevention and control.
The codes are intended to prohibit movement of poultry from or through areas quarantined due
to disease. Any vehicle or equipment transiting a quarantined area must be cleaned and
disinfected in accordance with state and Federal regulations. Disposal of all dead poultry is
required, with the means of disposal generally restricted to incinerators or specific composters.
Older composters and compost pits, common in the past, are generally no longer acceptable
methods for poultry disposal. Code sections concerning health and sanitary conditions often co-
join state departments of health, veterinary medicine, safety, and/or other agencies.
States oversee and regulate integrators’ slaughter, processing, and distribution activities. The
regulatory burden on integrators is often much greater than on growers. Regulations governing
slaughter and processing procedures generally follow the FMIA and the PPIA, which control
operations and transactions affecting interstate commerce.93
While integrator regulation not associated with “crop” production is outside the scope of this
feasibility assessment, it contributes to institutional risks that may impact grower wellbeing.
These regulations ultimately affect growers. For example, compliant poultry operation
92 EPA, 2015, Animal Feeding Operations Overview, http://water.epa.gov/polwaste/npdes/afo/index.cfm, accessed April 2015. 93 Poultry products are sold under provisions of the Federal Meat Inspection Act, the Federal Poultry Products Inspection Act, or
the Federal Food, Drug and Cosmetic Act.
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management plans in Maryland must ensure proper storage, handling, and land application of
excess poultry waste. Until the current regulations were set, manure disposal was the
responsibility of the contract growers; now it is the integrator who must bear this cost.94
Private Insurance Inventory
Private insurance companies offer coverage to commercial poultry operations, family farm
poultry operations, private hatchery operations, and contract growers. Policies and the coverage
provided are described herein.
Disease Loss Coverage
During the course of the research the Contractor ascertained that at least one private insurance
company, Catlin, offered poultry producers the opportunity to purchase a rider on a property
catastrophic insurance policy to provide coverage for some disease related losses. These riders
are written on an individual basis and negotiated individually with the company. In email
correspondence, the representative of the company indicated that coverage could be extended, on
a case by case basis, to the “widely known” diseases such as avian influenza, Newcastle disease,
and Salmonella enteriditis. For the policy to be granted, the producer’s history of disease,
biosecurity measures, and disease related protection protocols would need to be investigated by
the company and assessed in light of the potential risk. The company representative had no
knowledge as to any restrictions being in place on the company to offer these riders in any state
in the United States. These catastrophic policies are underwritten by a consortium with Lloyds
of London. It is likely that other agents could access these same disease benefits through other
consortium members. However, the one-off nature of these policies and the individually
established premiums will limit access to these products to highly motivated (risk averse)
insureds. The Contractor also discussed disease coverage with Nationwide, a major underwriter
of catastrophic property coverage for poultry. The representative indicated poultry mortality
could be a covered cause of loss and that policies for disease coverage could be written.
However, he was not aware of any such policy being in force. Since the 2014-2015 HPAI
outbreak, these offers have been withdrawn. The Contractor has not been able to determine if or
when these offers might again become available.
Building Coverage
Although coverage varies by company, “All Risk Coverage” insurance is available for farm
buildings. These policies indemnify losses from fire, weather, damage due to snow and ice load,
or impact by a farm-owned vehicle. Replacement cost coverage is available for farm buildings.
Typically, no depreciation is calculated in establishing indemnities. Building policies tend to
cover the repair or replacement of fixed equipment. Replacement cost coverage is also available
for all on farm dwellings including the replacement cost of contents.
Companies writing poultry insurance building coverage have various underwriting requirements
based on the age of the poultry house. Policies are generally contingent on a favorable
inspection of the poultry house. Although insurance companies tend to have a limited range of
premium rates regardless of house construction materials (i.e., the premium rate on all-metal
houses may be the same as the premium rate on wood frame houses), there is a movement
toward differentiating the rates, with all-metal housing receiving discounts. While insurance
94 State of Maryland. 1998, BILL INFO-1998 Regular Session-SB 41.
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companies may not fully understand the exposures presented by environmentally controlled
housing, computer technology to manage inputs and outputs, and integrated processing
equipment, several insurance companies have focused attention on developing coverage that
appropriately addresses these details of the poultry industry.
Flock Insurance Coverage
Most insurers offering coverage for the poultry industry do not typically cover animal mortality
or loss of business income resulting from loss of birds. However, several carriers and/or
agencies are aggressively seeking customers through online sales.95
Some insurance is available
to cover the value of lost poultry as well as the loss of business income resulting from the
inability to complete a production cycle. Covered losses include losses to livestock due to
contaminated feeds, smoke, failure of environmental controls, suffocation of the livestock,
biosecurity issues (terrorism and quarantine), and certain defaults by integrators.96
These
product lines are offered in at least 19 states, including most, but not all the major poultry
production locations97
and are offered by carriers who underwrite insurance in the United
States.98
The terms of the policies are considered proprietary. Agents at three agencies indicated
they had not yet seen a policy covering feed conversion (the best measure of production).
However, two agents indicated individual policies are negotiated with terms defined by the
insured and underwriting and premium defined by the insurer. Most of the existing policies
cover catastrophic losses.
Flock insurance coverage is available for heat prostration due to power interruption (both on and
off premises) from any cause including mechanical breakdown and fuse breakage. Some
policies require a back-up system or alarm system warranty in order to offer power interruption
coverage. Policies may provide schedules to value types and ages of birds differently within the
same policy or may value poultry using a simple formula based on both the age at which birds
are typically marketed and different values for various types of birds. Coverage is available for
full mortality and theft, specific perils and theft, major medical, loss of use, and infertility.
Programs are available for insurance under an “agreed value endorsement,” wherein the value of
breeding stock is insured for a predetermined value regardless of market forces. There is also a
“market value endorsement” option where the market value acts as an adjustment increasing the
value of the poultry when the market value increases. Coverage available in Canada through
mutual insurance arrangements appears to be even more extensive,99
suggesting that demand
over time may drive the development of additional available coverage options in U.S. markets.
Business Interruption Coverage Following Depopulations
After delivery of the draft of this report, the Contractor was made aware of an offer of insurance
for business interruptions resulting from depopulations due to HPAI. Like the aforementioned
mortality insurance, this offer appears to be underwritten by an international consortium and is
95 e.g., The Hartford, http://www.thehartford.com/business-insurance/poultry-insurance, accessed April 2015. 96 TGA Cross Insurance, http://www.thomasgregory.com/property-casualty/poultry/, accessed April 2015, Alabama Farm
Insurance, http://alabamafarminsurance.com/, Westfield Insurance,
http://www.westfieldinsurance.com/farm/farm_insurance.jsp/, accessed April 2015. 97 Westfield Insurance, http://www.westfieldinsurance.com/farm/farm_insurance.jsp/, accessed April 2015. 98 Nationwide Agribusiness, the agricultural arm of the Nationwide Insurance, and its affiliates Allied Insurance offer this
insurance and are the largest underwriter of farmowners’ property and casualty insurance in the United States. 99 North Blenheimual Mutual Insurance, http://www.northblenheim.ca/products/farm/poultry-coverage/, accessed April 2015.
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available as a standard policy and on a surplus line basis. Although the Contractor was given the
opportunity to examine policy materials, it was upon the condition of not revealing the language
of the policy to protect certain intellectual property rights of the offerer. However, the
Contractor was permitted to indicate on this broadly available product coverage is offered for a
set period following depopulation resulting from a government action resulting from a verified
HPAI infection; fixed costs identified in the policy as well as continuing expenses and lost
profits are indemnifiable until either the end of the insurance period or the release of the facility
for repopulation. Currently coverage is targeted for both the poultry meat and layer sectors.100
Loss of Income Coverage
Loss of income coverage is available to poultry operations from the private insurance industry.
Profits insurance is also available with a 12 month loss of income agreement. Some companies
offer policies for loss of egg income or income from meat birds. Within these policies, growers
may be allowed to choose the limit per bird. Typically, loss of income coverage for poultry
houses is included in the Farm Owner’s Policy, which stipulates coverage of the entire farm (i.e.,
house, tractor, barn, and poultry houses). Loss of income coverage for the broiler house growers
and producers is generally based on structural and/or mechanical risks. Loss of income
insurance is available as a result of damage to the covered poultry houses, generators, freezers,
feed equipment, etc. Coverage may not be available for older houses (12 to 15 years old) or the
premium for older houses may be prohibitive. Loss of income coverage for the poultry industry
is less common than for some other industries due to the limited loss exposure and reduced
amount of risk.
TGA Cross Insurance, Alabama Farm Insurance, Westfield Insurance, the Livestock Department
of Hartford Insurance, and Nationwide Agribusiness (the agricultural arm of the Nationwide
Insurance) offer loss of income and flock insurance. According to industry representatives,
Nationwide Insurance, Hartford Insurance, and a third unnamed major company (although this is
most likely the Lloyds consortium) carry much of the poultry liability. Nationwide Insurance
and its affiliates Allied Insurance are the largest underwriter of farm owners’ property and
casualty insurance in the United States. They appear to be aggressively targeting poultry
markets with policies customized through negotiations to reflect the risk borne by growers,
producers, and integrators. While the Contractor found mortality coverage for extreme weather
conditions is available from a variety of sources, along with corollary business interruption
insurance, such coverage for disease is not available in “prepackaged” products. Several agents
indicated a willingness to talk about such coverages, but none had had experience negotiating
policies for these perils.
Coverage in Transportation
Some policies are available to provide coverage for growers, producers, and integrators requiring
transportation of poultry or eggs from one listed location to another, if the vehicle is owned by
the policy holder.
Basic Farm Liability
Basic Farm Liability is available for all but the smallest operations.
100 J.D. Goff, Vice President, National Accounts Underwriting, James Allen Insurance; personal communication, July and August
2015; B. Satterfield, Executive Director, Delmarva Poultry Industry, Inc., personal communication, August 2015.
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Employers Contingent Liability
Employers Contingent Liability is available with the ability to add employees as insureds.
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SECTION V. DATA AVAILABILITY AND APPLICABILITY ASSESSMENT
This section of the report addresses requirement in the Study on Poultry Catastrophic Disease
contract Section 2.4.1 that calls for the Contractor to “conduct a search for price data at the
national and regional level, and “yield” data in each geographic region. Identify viable data
series.”101
The contract for the study identifies catastrophic diseases as: “An occurrence of a
widespread disease, but not due to insufficient or improper application of disease control
measures for poultry.”102
Development of insurance typically is driven by data. Diverse and comprehensive data are
required to assess the appropriate rates for an actuarially-sound catastrophic disease insurance
product. For the product to be meaningful to the insured, it must address the appropriate diseases
and be rated to address the insured’s risk. This would in turn require a comprehensive poultry
catastrophic disease dataset. The Contractor notes that the insurance industry has developed
products for other adverse events having low frequency and unpredictable severity, such as
hurricane exposures in the coastal areas of the United States. For example, in the case of
hurricane damage, probability distributions of frequency of occurrence, wind speed, and other
parameters of the hurricane itself as well as engineering models of the damage that occurs under
various conditions were employed to obtain best estimates of the appropriate premium rates.
APHIS conducted a symposium in Ft. Collins, Colorado, concerned with data addressing the
frequency and severity of poultry catastrophic disease outbreaks. The conclusion among the
participants was that time series data such as those required for traditional quantitative rating of a
catastrophic disease insurance product were not available and most likely never would be
available. However, the participants determined the rating issue was not insurmountable if
sufficient time and funds were available. Both the Netherlands and Germany provide
compensation for poultry catastrophic disease events and apparently model the funding required
for that compensation.103
The most comprehensive insurance dataset would include data on total production, production
cycle, and inventory by poultry species, location, characteristics of the production facility (e.g.,
pole barn versus enclosed climate controlled facility), and management practices (e.g.,
conventional, organic, free-range, etc.). It would also include data on disease events including
number of birds affected, natural mortality, condemnations, and depopulation numbers by
species, location, disease, characteristics of the production facility, and management practices.
For chickens and turkeys, the variety of the bird is also an essential element of any quantitative
catastrophic disease analysis. Broilers and layers are known to be affected by diseases
differently (see for example Table 12). It may also be that heavy and light chickens respond
differently. The extraordinary breast size of some of the turkey varieties makes skeletal diseases
affecting these birds a risk likely to show varietal differences as well.
101 U.S. Department of the Interior, Interior Business Center, ADQ, 2014, Order Number: D15PD00012, page 21 of 26. 102 U.S. Department of the Interior, Interior Business Center, ADQ, 2014, Order Number: D15PD00012, Section 1.10, page 16 of
26. 103 Jim Driscoll, personal communication, June 2015.
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Table 12. Important Diseases by Poultry Industry Sector Disease Broilers Layers Turkeys Gamebirds
Avian Metapneumovirus (AMPV) yes yes
Blackhead (Histomoniasis) yes
Bordetella avium (BART) yes
Cellulitis yes
Chicken Anemia Virus yes
Colibacillosis yes yes yes yes
Exotic Newcastle Disease yes yes yes yes
Fowl Cholera yes yes yes yes
Fowl Choriza yes
Gangrenous Dermatitis yes
H3N2 Influenza yes yes
Highly Pathogenic Avian Influenza yes yes yes yes
Highly Pathogenic Infectious Bursal Disease Virus yes
Infectious Laryngotracheitis yes yes
Marek's yes yes
Mycoplasma gallisepticum (MG) yes yes
Mycoplasma Synoviae (MS) yes yes
Necrotic Enteritis yes yes yes yes
Ornithobacterium rhinotracheale (ORT) yes yes
Poult Viral Enteritis yes yes
Reoviral Tenosynovitis yes
Runting and Stunting Syndrome yes
Salmonella enteritidis (SE) yes
Turkey Coronavirus yes
Uncontrolled Coccidiosis yes yes yes yes
Uncontrolled Infectious Bronchitis Virus yes yes
Urolithiasis/Gout yes
Very Virulent Infectious Bursal Disease yes
Source: The Contractor’s Research Department after data supplied by Andrew Rhorer, formerly national coordinator and
executive secretary of the General Conference Committee of the National Poultry Improvement Plan for APHIS.
Finally, a comprehensive insurance database will address information on insurable interest by
integrator, grower, and producer. This is important because both growers, especially of turkeys,
and independent producers indicated their contractual arrangements included a range of
distribution of risk among the parties. The distribution of insurable interest among the various
parties and the responsibility for making disease-related management decisions both need to be
addressed in an appropriate catastrophic disease product for poultry. The impact of anything less
than a comprehensive dataset to support the development effort will be discussed later in this
section.
Primary agricultural data are collected directly from the data source. In the case of agricultural
production, primary data come from the entity (person, partnership or corporation) responsible
for the crop (including livestock and livestock products like eggs). In the case of disease,
primary data can be provided by growers, producers, and integrators, although the integrators are
have substantial data from growers and/or producers. The granularity of primary data supports
an analysis that limits uncertainty. This in turn allows risk premiums to be minimized. For most
crop insurance products, the risk premium and the subsidies provided by the government for the
purchase of insurance are important elements in a potential insured’s decision to purchase the
insurance. The Contractor heard repeatedly from stakeholders in the poultry segment of the
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agricultural economy that the thin margins in the industry will make the cost a critical factor in
these decisions.
NASS is the principal repository of primary agricultural data for the United States. NASS
conducts numerous surveys each year and prepares reports covering most aspects of U.S.
agriculture. The most comprehensive survey is the Census. This Census, conducted every five
years, is especially valuable because its methods are transparent; furthermore, it is conducted
using a relatively consistent methodology. While farm-level data are only available under
limited circumstances that will protect the anonymity of the data sources, the Census report
provides detailed aggregate information about many aspects of U.S. agriculture. It is the only
source of uniform, comprehensive agricultural data for every state and county in the United
States. Participation by producer, regardless of the size or type of operation, is expected and
NASS makes every effort to encourage such participation.
The Census reports inventory and sales of 14 species of domesticated fowl and commercial
game-birds as well as poultry from other species under the category “other poultry” (Table 13).
The Census reports on inventory, farms with inventory, and numbers sold for these species. For
the major species there is a breakdown to identify these quantities by industry sector and by size
of operation in the published Census report.
Table 13. Census of Agriculture Poultry Species for which Data are Collected and
Reported Species
Chickens Peafowl
Chukars Pheasants
Ducks Pigeons/squabs
Emus Quail
Geese Rheas
Guineas Turkeys
Hungarian partridge Other poultry
Ostriches
Source: The Contractor’s Research Department after USDA,
NASS, 2012 Census of Agriculture Table 32.
Many production and inventory data from the Census are also available at the state level in both
the published and online versions of that report (Tables 14 and 15). The online version allows
preparation of customized reports for limited areas of significance to the analysis. However,
NASS does not report comprehensive data on poultry diseases in the Census; a review of the
questionnaire shows these data are not collected.104
NASS county-level data, available primarily
in Census reports, are limited because of the respondent confidentiality requirements of the
NASS reports. The ‘D’ notations in Tables 14 and 15 represent data censored to preserve
confidentiality of proprietary data. “In keeping with the provisions of Title 7 of the United
States Code, no data are published [by NASS] that would disclose information about the
operations of an individual farm or ranch. All tabulated data are subjected to an extensive
disclosure review prior to publication. Any tabulated item that identifies data reported by a
respondent or allows a respondent’s data to be accurately estimated or derived, was suppressed
104 USDA, NASS, 2012 Census of Agriculture Questionnaire.
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and coded with a ‘D’. However, the number of farms reporting an item is not considered
confidential information and is provided even though other information is withheld.”105
Furthermore, the infrequent distribution of the wide-ranging Census surveys (i.e., once every five
years) limits their utility for insurance development.
Table 14. Sample Census of Agriculture Arkansas State-level Annual Sales: Chickens by
Operation Size Operation Size
by Annual Sales (Head)
Total Live Bird Sales
Broilers Replacement Pullets Roosters
1 to 1,999 8,450 1,474
2,000 to 15,999 D 108,668
16,000 to 29,999 D 498,456
30,000 to 59,999 1,083,201 2,393,381
60,000 to 99,999 3,779,023 11,365,371
100,000 to 199,999 34,721,588
100,000 or more
3,940,569
200,000 to 299,999 67,296,079
300,000 to 499,999 229,420,093
500,000 or more 639,594,539
Not specified 975,950,973 4,422,823 1,463,791
Source: The Contractor’s Research Department after USDA, NASS, 2012 Census of Agriculture, Quick Stats
output, accessed April 2015.
Table 15. Sample Census of Agriculture California County-level Single Period Inventory:
December Chukar Inventory County Operations Inventory
Alameda 2 D
Butte 5 17,276
Fresno 4 6,952
Kern 1 D
Lassen 1 D
Plumas 2 D
Riverside 2 D
San Diego 1 D
San Joaquin 2 D
Shasta 2 D
Solano 1 D
Stanislas 2 D
Sutter 4 2,400
Tehama 1 D
Source: The Contractor’s Research Department after USDA,
NASS, 2012 Census of Agriculture, Quick Stats output, accessed April 2015.
More poultry industry data, including annual estimates derived by NASS from annual surveys,
are available for the larger sectors of the industry: chickens (including egg production), ducks,
and turkeys. In addition to production and economic data, the NASS survey-based estimates
data include estimates of condemnations for chickens, ducks, turkeys, and other poultry
(aggregated). These condemnations are documented for airsacculitis, leukosis, synovitis,
tuberculosis, tumors, contamination of the meat from harvested birds, and a variety of generic
105 USDA, NASS, 2012 Census of Agriculture, Introduction IX.
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physical (e.g., bruising) and processing (e.g., over scalding) problems identified during harvest.
NASS carefully documents its Census106
and survey methods107
for use in data analysis by third
parties. The survey analyses extrapolate from the responses from limited populations surveyed
using standard sample survey methods. The extrapolations build on patterns identified in the
Census. However, the limited number of large poultry operations and the large number of small
operations reported in the Census survey limit the utility for the detailed quantitative analysis
essential for development of an insurance product meaningful to producers and appropriately
addressing their risks.
As reported previously, data from NASS on disease (Table 16) are limited and address only a
small fraction of the poultry disease considered important. Instead, it appears collection of the
condemnation data by NASS is focused on poultry as an element of the food supply rather than
on poultry diseases as a risk to the poultry sector of the agricultural economy. Data on the other
sectors of the poultry industry are even more geographically limited, sporadic, and in many cases
anecdotal.
Table 16. Sample of NASS Reported Condemnation Data: Chicken Condemnations Due to
Diseases in 2014 by Number of Head Disease Immature Heavy Light
Airsacculitis 6,549,813 146,763 68,461
Leukosis 74,371 1,265 4,131
Septicaemia 10,749,517 445,838 1,204,988
Synovitis 147,563 947 943
Source: The Contractor’s Research Department after USDA, NASS, 2015, Quick Stats
APHIS maintains data on “reportable” animal diseases. Currently reportable diseases include
HPAI, low pathogenic avian influenza (H5 or H7 subtypes), Newcastle disease, turkey
rhinotracheitis, infectious bronchitis, infectious laryngotracheitis, duck viral hepatitis, fowl
cholera (Pasteurella multocida), fowl typhoid (Salmonella gallinarum), infectious bursal disease
(Gumboro disease), Marek's Disease, mycoplasmosis (both M. gallisepticum and M. synoviae),
chlamydiosis (psittacosis and ornithosis, Chlamydia psittaci), and Pullorum disease (Salmonella
pullorum). This list constitutes approximately two thirds of the diseases considered important to
poultry operations by the industry (See Table 12).
To encourage compliance with reporting requirements, APHIS considers most of its data
proprietary and publishes limited announcements of disease events. The Contractor was
surprised to learn from a former APHIS NPIP panelist that farm-level data on occasion have not
been available even to the panel.
APHIS is in the process of revising its list of reportable diseases; changes for poultry disease
reporting may even reduce the number of diseases for which data are collected. Due to issues
with confidentiality and because of the sensitivity of information concerning financial losses of
106 USDA, NASS, 2009, Surveys: Census of Agriculture, http://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/
Census_of_Agriculture/index.asp, accessed April 2015; USDA, NASS, 2014, 2012 Census of Agriculture, Appendix A
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf, accessed April 2015. 107 See for example: USDA, NASS, 2014, Poultry - Production and Value 2013 Summary,
http://www.nass.usda.gov/Publications/Todays_Reports/reports/plva0414.pdf, accessed April 2015.
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individual operations, the Contractor does not believe access to farm-level data for insurance
development could be obtained by an outside Contractor, even with a confidentiality agreement,
and believes access to that information by RMA personnel would require action by the Secretary
of the Department of Agriculture. It is not clear that aggregate data could be released for
development of a catastrophic disease insurance product. The limited frequency of most
widespread diseases would make it likely APHIS data could be linked to specific operations even
if the data were censored. APHIS has published information on AI depopulation on their
website. Archival information may be useful to understand the potential interactions of APHIS
compensation programs for depopulation and a poultry catastrophic disease insurance product.
However, the focus of APHIS data is on live bird takings. Thus for the development of
insurance, the APHIS data could be used to extrapolate frequency of the reportable events, but
not necessarily the severity of natural deaths due to the reportable diseases.
APHIS is responsible for the U.S. report on OIE (Office International des Epizooties – World
Organization for Animal Health) reportable diseases. These reports include 13 poultry diseases
(Table 17). Like most other lists of poultry diseases, the OIE reportable disease list includes
diseases that are highly infectious, diseases with very high mortality, and endemic diseases. The
presence of many of these diseases in wild populations makes them particularly difficult to
control in commercial flocks. The passage of avian influenza between wild and commercial
flocks has characterized the recent outbreak of HPAI in the United States. The Contractor notes
the OIE reports provide only metadata on animal disease. However, even the data underlying
these metadata will not include the essential elements of a comprehensive poultry disease
insurance dataset.
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Table 17. APHIS Report on the Status of OEI Reportable Diseases in the United States in
2012 Disease Status Date of Last Occurrence / Notes
Avian chlamydiosis Present Sporadic (wild birds, pet birds, backyard) / no
commercial production flock detections in 2012
Avian infectious bronchitis Present
Avian infectious laryngotracheitis Present Sporadic (primarily vaccine-related)
Avian mycoplasmosis (M.
gallisepticum) Present
Sporadic / all commercial poultry breeding flocks are
under a surveillance program to confirm infection-free
status. Commercial table-egg laying may be vaccinated
Avian mycoplasmosis (M. synoviae) Present
Sporadic / all commercial poultry breeding flocks are
under a surveillance program to confirm infection-free
status.
Duck viral hepatitis Free 1998
Fowl typhoid (Salmonella gallinarum) Free 1981
Highly pathogenic avian influenza Free 2004
Low pathogenic avian influenza
(poultry) Notifiable H5 and H7
Identification
of the
presence of
infection
Identified sporadically in backyard poultry and in live-
bird-markets which serve local ethnic communities. No
commercial production flock detections in 2012.
Infectious bursal disease (Gumboro
disease) Present Sporadic
Newcastle disease (Neurotropic and
viscerotropic strains) Present (wild)
2003-domestic poultry are considered Free / sporadic
detections in wild birds
Pullorum disease (Salmonella
pullorum) Present?
Sporadic (backyard) / no commercial production flock
detections since 1991, considered absent in them / no
detections reported in 2012
Turkey rhinotracheitis Present? Disease suspected but not confirmed limited to certain
zones / regions of the country
Source: The Contractor’s Research Department after USDA, APHIS, 2013, United States of America’s Status of OEI Reportable Diseases: 2012,
http://www.aphis.usda.gov/vs/nahss/docs/us_status_of_oie_diseases_2012.pdf, accessed April 2015. APHIS is anticipating release of the 2014 report shortly.
The contract defines a catastrophic disease event as “An occurrence of a widespread disease, but
not due to insufficient or improper application of disease control measures for poultry.”108
It is
interesting to note the contract definition introduces an element of ambiguity into the process of
identifying catastrophic disease. Widespread can be interpreted to mean highly infectious,
prevalent, causing high mortality, endemic, epidemic, or pandemic. There are a relatively small
number of diseases considered important by every sector of the poultry industry (Table 18).
However, stakeholders did not consistently name these diseases as the most important
catastrophic disease(s) in their sector. This categorization seemed to be largely influenced by a
stakeholder’s personal experiences rather than by some statistical characterization of the impact
of a disease on the economy, the industry or industry sector. Nonetheless, inasmuch as an
outbreak of HPAI was reported during the course of this study, and as that disease spread to
numerous states, in most conversations about catastrophic disease, HPAI was at least mentioned.
In the later conversations HPAI was the main topic of discussion.
108
U.S. Department of the Interior, Interior Business Center, ADQ, 2014, Order Number: D15PD00012, Section 2.4.1, page 16
of 26.
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Table 18. NASS Reported Condemnations of Chickens Due to Diseases in 2014 Disease Broilers Layers Turkeys Gamebirds
Highly Pathogenic Avian Influenza yes yes yes yes
Colibacillosis yes yes yes yes
Exotic Newcastle Disease yes yes yes yes
Fowl Cholera yes yes yes yes
Necrotic Enteritis yes yes yes yes
Uncontrolled Coccidiosis yes yes yes yes
Source: The Contractor’s Research Department after Table 12.
The programs for disease response supported by the NPIP are also limited to a few of the
important poultry diseases (Table 19). The NPIP was established to foster cooperation among
industry, state, and federal programs with a focus on diagnostic techniques that can be applied to
the improvement of poultry health and poultry products safety. Developed initially in response
to Pullorum Disease, caused by Salmonella pullorum, NPIP has been expanded to address
diseases that currently affect U.S. commercial and wild flocks. While this focus identifies
diseases that are likely catastrophic if and when they occur, the substantial success of the NPIP
protocols to limit risk makes it less likely that these diseases should be the sole focus of a named-
peril insurance product, with the possible exception of HPAI. Regardless, the data maintained
by APHIS under the NPIP program relate more to testing than to disease and do not include
many of the important data elements for a comprehensive catastrophic disease database.
Table 19. Poultry Diseases with NPIP Protocols for Response Disease Broilers Layers Turkey Gamebirds
H3N2 Influenza
yes yes
Highly Pathogenic Avian Influenza yes yes yes yes
Salmonella enteritidis (SE)
yes
Salmonella galliarnum
(Fowl Typhoid) yes
Mycoplasma gallisepticum (MG)
yes yes
Mycoplasma synoviae (MS)
yes yes
Source: The Contractor’s Research Department after Table 12
State veterinarians (Appendix C) often have broad-ranging responsibilities and duties, potentially
including prevention, control and eradication of animal diseases in all animals in the state.
Generally both livestock and pet health are monitored at some level, though some state
veterinarians also have responsibilities addressing wildlife health. In a way this supports the
need for disease experts to be cognizant of commercial, backyard and wild flocks. However,
these broad responsibilities often tax the limited resources of the state agencies. State
veterinarians generally collect data on some animal diseases. In many ways the responsibility of
these modestly staffed departments mirror those of APHIS. However, these data are not
collected using any uniform protocol or methodology. State veterinarians cooperate with APHIS
in addressing reportable disease outbreaks in poultry. The Contractor found no evidence the
limited data available through these offices could be compiled into even a component of a
comprehensive poultry disease insurance dataset, in large part because the different offices have
such disparate responsibilities and staffing levels.
The United States Animal Health Association (USAHA) is a non-profit, voluntary organization
whose mission is focused on animal health issues. Membership includes representatives of state
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and federal animal health offices, national organizations representing sectors of the livestock
industry, regional representatives from five geographic regions, and individual members.
Individual membership includes university research staff, commercial research scientists,
veterinarians, livestock producers, and extension service personnel. USAHA represents all 50
states. Among other topics, USAHA work focuses on disease eradication, emergency
preparedness, emergency response and recovery, and emerging diseases. The USAHA
Committee on Transmissible Diseases of Poultry and Other Avian Species (Poultry Committee)
is to “provide information and advice… on issues pertaining to the health of animals of the avian
species …, [including] the prevention, control and eradication of transmissible diseases of the
avian species.”109
USAHA issues annual reports on transmissible diseases of poultry. The quantitative information
presented in these reports are metadata that address a wide variety of poultry disease issues.
Because the reports are focused on actions supported by the USAHA, the published data focus
on the current agenda of the USAHA Poultry Committee and vary from year to year (Tables 20
and 21).
Table 20. Poultry Diseases Topics Addressed in the 2004 Report of the Committee on
Transmissible Diseases of Poultry and Other Avian Species - USAHA Topic Documented with Metadata
Subtypes of low pathogenicity AI virus or specific antibodies detected in non-commercial birds, FY 2004.
Most frequently identified Salmonella serotypes from chickens
Most frequently identified Salmonella serotypes from turkeys
The number of chickens in Salmonella pullorum positive flocks
Mycoplasma positive breeding flocks 2003-2004
Types of Poultry disease testing
Source: The Contractor’s Research Department after USAHA, 2005, 2004 Report of the Committee on Transmissible Diseases of Poultry and
Other Avian Species, http://www.usaha.org/Portals/6/Reports/2004/report-pad-2004.pdf, accessed March 2015.
Table 21. Poultry Diseases Topics Addressed in the 2014 Report of the Committee on
Transmissible Diseases of Poultry and Other Avian Species - USAHA Topic Documented with Metadata
York Infections and starve-outs in caged and cage-free pullets
Top five caged and cage-free pullet diseases
Top five caged and cage-free layer diseases
Comparison of 2013 and 2014 issues and diseases of concern
Areas requiring research
State and university animal diagnostic laboratories survey participants by year
Numbers of total diagnoses by diagnosis category* for 2012-2014
Numbers of total diagnoses by diagnosis category* by avian group for 2012-2014
Number of total diagnoses for each disease or condition reported in the survey**
Sample types for AI, Salmonella, Pasteurella and Mycoplasma by state, disease
Source: The Contractor’s Research Department after USAHA, 2015, 2014 Report of the Committee on Transmissible Diseases of Poultry and
Other Avian Species, http://www.usaha.org/Portals/6/Reports/2014/report-pad-2014.pdf, accessed March 2015.
*Diseases are grouped into four categories: bacterial, fungal, parasitic, and viral. **These data are reported on a testing basis rather than on birds affected or flocks affected basis.
109 USAHA, 2011, Committee On Transmissible Diseases Of Poultry And Other Avian Species,
http://www.usaha.org/Committees/TransmissibleDiseasesOfPoultryAvianSpecies.aspx, accessed April 2015.
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One advantage of the data collected by USAHA is that their surveys are not restricted under the
Paperwork Reduction Act; hence the questions asked and data collected can be modified over
time without need to engage in a lengthy Federal approval process. One disadvantage is the
sampling methodologies are not well documented in the reports. Furthermore, there are no farm-
level data of the type that would be most useful for development of a catastrophic disease crop
insurance product.
The Contractor identified more than 6,000 academic research articles addressing poultry
catastrophic disease through an internet search and database searches of the major scientific
publishing houses. The Contractor found no subset of these articles focused on the data required
for crop insurance development for a catastrophic poultry disease product. Most of the research
articles addressed a single disease and presented either aggregate data for the disease, single
incident case studies, epidemiological studies, or documented testing or preventative practices
(including vaccines). Inasmuch as the methods used for data collection were not consistent,
consolidating the data available in different articles would by no means produce the
comprehensive dataset required for development. Furthermore, it was not possible in many
cases to be sure that the data in different articles was not replicated. The precision of the data
presented in different articles suggested that some used rounding to facilitate comparison
between dissimilar events.
More than anything the search for data with which to construct a comprehensive poultry
catastrophic disease insurance dataset convinced the Contractor that even with extraordinary
efforts constructing such a database from disparate sources of historical data would be fraught
with problems. It appears the only viable mechanism for development of such a database would
be by a survey instrument administered by a Federal agency and distributed annually to all
poultry producers. While such a survey could address either a short list of identified catastrophic
diseases or a longer list of diseases to support the identification of those diseases that could be
categorized as catastrophic, actual implementation of either survey would be challenging. First
and foremost are the restrictions imposed by the Paperwork Reduction Act on surveys conducted
by or on behalf of Federal agencies. If this hurdle were overcome, the scope of the survey would
be enormous. A precise number of poultry operations in the United States is difficult to establish
because more than one poultry type may be produced on a single operation. However, it appears
poultry are produced on as many as 10 percent of the 2,109,303 agricultural entities identified in
the 2012 Census. Due to the infrequency of poultry disease events, a database development
survey could likely not be sent to a small sample of these entities. Furthermore, the most
comprehensive data would be obtained from an annual survey conducted over a period of 10 to
20 years. Obviously, such a data gathering effort is not only beyond the scope of the contract
under which this report was produced, it is beyond the scope of RMA, and even of NASS unless
special funding were made available for the necessary staffing, infrastructure, and analysis.
Finally, considering the most important issue to potential insureds was downtime rather than the
disease itself, any database development effort would need to focus not only on the diseases, but
also on the on ensuing downtime. This adds substantially to the challenges to database
development for insurance development as many criteria for downtime are idiosyncratic.
In the absence of quantitative analysis to develop the necessary rates for a poultry catastrophic
disease product, judgmental rating is the remaining approach. This is the approach used in the
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rating for the private poultry catastrophic loss policies. Nonetheless, the hurdles to even a
judgmental rating of poultry catastrophic disease risks are substantial. First there is the
identification of which diseases are in fact catastrophic, including which have the greatest impact
on downtime. Then there is the likelihood that the low frequency of major disease events will
result in widely different judgments among the various experts. There is a large cohort of
experts on poultry disease. Many of these are veterinarians who manage disease control
programs. Some work for the integrators, some for state agencies, and some for the federal
government. Those working with the integrators likely have access to appropriate farm-level
data. It is even possible that the data the largest integrators have could be compiled to comprise
an appropriate comprehensive dataset for development. However, veterinarians working for the
integrators are constrained by company policy and confidentiality agreements from sharing these
data. To further complicate analysis, experts from the different industry sectors are likely to
judge the risks of various diseases in different ways. Procedures exist to derive from these
dissimilar judgmental assessments the data for the insurance development. It might even be
most appropriate to develop separate judgments of frequency and severity, rather than
developing a judgmental rate which conflates these two components. However, rates derived
from either of these approaches will necessarily include an uncertainty load greater than that
required from an analysis of a comprehensive database.
The contract requires the Contractor to address the applicability of the available data to the
development of an insurance product from the point of view of the feasibility of developing such
a product. The Contractor has identified only fragments of the necessary quantitative data for a
rigorous quantitative analysis of the frequency and severity of catastrophic poultry disease
events. The Contractor has not identified a mechanism to combine these fragments to make a
complete rating dataset. The uncertainty accompanying infrequent and potentially severe
outbreaks of known diseases, combined with the uncertainty surrounding diseases that have not
yet affected U.S. poultry and diseases of wildlife that have not yet affected the global
commercial poultry industry, has led the Contractor to conclude that any attempt to address
diseases collectively will not succeed. It may be possible to aggregate sufficient information
about a small subset of poultry diseases (i.e., AI and Exotic Newcastle Disease) to rate a named
peril product. However, the Contractor saw no general enthusiasm for such a product, until the
outbreak of HPAI created such interest. Interest in a downtime insurance product, especially
following the HPAI outbreak was much higher. A reasonable conclusion is that the individual
grower, integrator, or producer is likely better served by the customizable private products
available for poultry catastrophic loss, especially if those products that offered disease loss
coverage again become available, than by a generic product not adapted to address the insured’s
particular risk aversion.
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SECTION VI. PRICING METHODOLOGIES INVESTIGATIONS
According to the OIE World Animal Health Information System, and until the 2014 HPAI
outbreak, the United States has not had a significant commercial-poultry-related catastrophic
disease outbreak since 2004.110
Hence, any outbreak of one of these diseases would be
considered a Foreign Animal Disease (FAD). Developing an insurance program to cover costs
related to the outbreak of a poultry FAD is challenging in that the current response protocols for
such an outbreak is “stamping-out” or the “depopulation of all clinically affected and in-contact
susceptible poultry.”111
Depending on the timing of such an outbreak, the economic impacts to
the producer could range from minimal (newly acquired shipment of chicks, outbreak confined
to a single brood house, destruction and clean-up costs, and downtime and reset operation costs)
to catastrophic (outbreak affects multiple houses, flocks ready for shipment to market,
destruction and clean-up costs, and downtime and reset operational costs).
VI.A. Broiler Sector
The best way to describe the “price” received by contract growers would be to document
contract prices over time. However, reliable longitudinal datasets recording contract payments
are not publicly available. In fact, no report of prices actually received by the growers by state is
available. Despite efforts by the Contractor to obtain these data from growers or integrators,
these data were considered proprietary. An alternative is the “Poultry Yearbook” live-weight
equivalent broiler prices, calculated by the USDA ERS.112
While this can serve as a proxy for
prices received by growers, it includes payments for feed and chicks, costs not paid by growers.
The 2006 update of these values, the most recent available, included estimated live-weight prices
received through 2004. Nonetheless, it is interesting to note, real prices for broilers appear to
have remained relatively constant since the early 1980s, in contrast to prices for many other
agricultural commodities. It may be possible to replicate the live-weight equivalent broiler price
calculations if relevant data were available. However, as noted above, ERS has not reported the
component data for the years after 2004. Consequently, the price discovery process is likely to
be a time consuming and expensive annual effort. The following data concerning broiler
production and pricing are available:
Urner Barry Price Current, wholesale broiler prices, daily and regionally, by subscription.
Broiler Sector Profiles: WattAgNet.com, 2015, Extrapolated industry statistics based on
NASS estimates, http://www.wattagnet.com/Marketdata/Poultry/, (accessed April 2015).
Broiler production data by Year: USDA, NASS, Quickstats, annual data on calculated
price, number raised, pounds produced, and values at the national and state level, some
very limited and sporadic county level data, http://www.nass.usda.gov/, (accessed April
2015).
110 World Animal Health Information Database (WAHID) Interface, animal Health Information, 2015, 2005 first quarter report,
OIE-listed diseases absent in United States of America during the reporting period or never reported, Birds,
http://www.oie.int/wahis_2/public/wahid.php/Reviewreport/semestrial/review?year=2005&semester=1&wild=0&country=U
SA&this_country_code=USA&detailed=1, accessed July 2015. 111 Newcastle Disease (ND) Response Plan: The Red Book (2014) USDA
http://www.aphis.usda.gov/animal_health/emergency_management/downloads/nd_response_plan_ppt_feb2014.pdf, accessed
July 2015. 112 USDA, ERS, 2015, Poultry Yearbook, http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1367,
No longer being updated, last update July 2006, accessed July 2015.
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contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
U.S. Poultry Production by Year: USDA, NASS, Poultry - Production and Value: 2014
Summary, http://www.nass.usda.gov/Publications/Todays_Reports/reports/plva0415.pdf,
(accessed April 2015).
U.S. Broiler Production and Value by Year: USDA, NASS, 2003-2013,
http://www.nass.usda.gov/Charts_and_Maps/Poultry/brprvl.asp, (accessed April 2015).
Poultry industry characteristics: USDA, NASS, Poultry and Egg Production, every 5
years,
http://www.agcensus.usda.gov/Publications/2007/Online_Highlights/Fact_Sheets/poultry
_and_eggs.pdf, (accessed April 2015).
Poultry Slaughter Reports: USDA, NASS, Poultry Slaughter, monthly and annual reports
on head, live weights and condemnations (some limited state-level data),
http://usda.mannlib.cornell.edu/usda/current/PoulSlau/PoulSlau-06-25-2015.pdf,
(accessed April 2015).
USDA, ERS Meat Price Spreads, http://www.ers.usda.gov/data-products/meat-price-
spreads.aspx (accessed April 2015).
Wholesale broiler prices: USDA, ERS, monthly,
http://search.ers.usda.gov/search?affiliate=ers&query=%E2%80%A2%09Wholesale%20
broiler%20composite%20prices (accessed April 2015).
No organized exchanges offer futures contracts for broilers or other poultry products. The recent
ERS focus on retail and wholesale prices provides an opportunity for RMA to develop a variety
of models for broiler prices. However, long-term data series, particularly those collected by the
government, are limited by changing foci in the data collection.
VI.B. Turkey Sector
For much more than half of production, turkey growers generally receive a contracted price per
pound of live bird and frequently have contracts that include incentive payments for feed
conversion rates and survival to harvest. The best way to establish “prices” received by contract
growers would be to document contract prices over time. Reliable datasets recording contract
payments over time are not publicly available; the integrators consider these data proprietary.
They have instilled a sense in the grower population that these data should not be revealed.
Payment is based on numbers and pounds of birds delivered times the contract price.
The next best data are retail turkey prices published by ERS. There is a substantial history of
price spreads between retail and wholesale prices. Using retail prices as a proxy for farm-level
prices is fraught with difficulty. Each of the elements of the retail price, costs paid by both
growers (management and labor) and integrators (stock, feed, and transportation), payments to
growers, processing costs, shipping costs, profit margins, etc. is subject to frequent and
somewhat unpredictable changes. Nevertheless, sufficient data exist to develop a model to
establish estimated farm-level payments for live-weight turkeys by pound.
Farm-level turkey prices, receipts, and values, including NASS and ERS data, are generally
calculated or estimated values; they are not values received by growers. Due to the level of
industry integration, farm-gate prices are not generally available for purchase of ready to
slaughter birds. The live-weight equivalent price per pound is calculated by subtracting
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processing cost per pound from ready-to-cook, whole-bird, wholesale price per pound and
multiplying the result by the dressing percentage.
There are a variety of resources available to assist with pricing. However, since the prices
received at the farm level incorporate additional “settlement” elements, the price discovery
process is likely to be a time consuming and expensive annual effort. The following data
concerning turkey production and pricing are available:
Urner Barry Price Current, wholesale turkey prices, daily and regionally, by subscription.
Turkeys production data by Year: USDA, NASS, Quickstats, annual data on price,
number raised, pounds produced, and values at the national and state level, some very
limited and sporadic county level data, http://www.nass.usda.gov/, (accessed April 2015).
U.S. Turkey Production in 2014: USDA, NASS, Turkeys: Numbers Raised by State, US,
http://www.nass.usda.gov/Charts_and_Maps/Poultry/tkymap.asp, (accessed July 2015).
U.S. Turkey Production and Value by Year: USDA, NASS, Turkeys: Pounds Produced
and Value of Production United States US, 1964-2014,
http://www.nass.usda.gov/Charts_and_Maps/Poultry/tkprvl.asp, (accessed April 2015).
U.S. Poultry Production by Year: USDA, NASS, Poultry - Production and Value: 2014
Summary, http://www.nass.usda.gov/Publications/Todays_Reports/reports/plva0415.pdf,
(accessed April 2015).
Poultry Slaughter Reports: USDA, NASS, Poultry Slaughter, monthly and annual reports
on head, live weights and condemnations (some limited state-level data),
http://usda.mannlib.cornell.edu/usda/current/PoulSlau/PoulSlau-06-25-2015.pdf,
(accessed April 2015).
No organized exchanges offer futures contracts for turkeys. The recent ERS focus on retail and
prices and the NASS focus on organic production makes it difficult to develop a variety model
for turkey farm-gate prices. The utility of data series on turkeys collected by the government for
insurance development are limited by changing foci in the data collection.
VI.C. Layer Sector
Establishing a price for losses of birds due to catastrophic disease events in the layer sector is
complex. First of all it is important to understand, from a crop insurance perspective, eggs are
the crop from a layer operation. The birds themselves, which are a capital asset of the operation,
produce the crop. The crop is lost if the birds die because of a catastrophic disease event
(whether the death is natural or the result of a depopulation). Furthermore, because the eggs are
produced seriatim, rather than in a single production event, the length of potential laying
becomes an issue in establishing the lost crop. In many cases, this production could occur in
more than one calendar year and likely more than one crop year (however that is defined). After
the layer reaches age one and a half to two and a half years, commercial hens are typically
slaughtered (culled). The larger the operation, the more likely culling will occur early.
However, laying can be stimulated by forcing the hen to molt. Following the molt, the frequency
of laying is increased relative to the frequency immediately prior to molting. Nonetheless, there
is a definite end to productive life of a layer and a logical financial end to that productive life
which occurs earlier than the biological end of productivity.
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For table egg layers a cost-of-production approach is appropriate for valuing the birds until the
birds begin laying. Layers increase in value from the day they hatch to the beginning of lay,
approximately half a year. Therefore until the layers reach this age, costs associated with raising
the birds reflect their ever increasing capital value. However, once the bird is laying, the net
value of the bird is a function of the number of eggs expected to be laid less the costs to maintain
the birds. APHIS calls this approach the income approach. Net income is a function of both
costs and gross income. The costs include fixed and variable costs. Furthermore, the number of
eggs that will be produced by a bird varies with management practices (for example if forced
molting is used or light cycle is manipulated). The salvage occurs not when the layers are spent
but when the cost of future production is in balance with the potential income derived from that
production. The timing of salvage is likely to be affected by a widespread loss of birds to
disease. When the number of layers is insufficient to meet the demand for eggs, even birds that
are performing poorly are likely to have a value higher than that when disease has not affected
the total U.S. layer population.113
Further complications in assigning a value to layers based on the net present value of future
production is the disparity in cost of production of shell eggs and breaking eggs. The processing
costs of breaking eggs are different as shell eggs are cooled, washed, culled, graded and
packaged; while the breaking eggs are cooled, washed, culled (but to a different standard),
broken, and then processed by drying and freezing. Packaging costs are very different for bulk
breaking egg products and breaking egg products destined for the retail market. The distribution
of fixed and variable costs in these different markets are also notable. Finally, the distinction
between operations that produce only shell eggs, operations that produce only breaking eggs, and
operations that produce both must be taken into account in calculating the net present value of
future egg production.
Stakeholders indicated they believed fixed costs of production should be covered by an
indemnification for birds lost to disease. Some even suggested that wages for idle employees,
who represent an asset of the operation, that could be lost if wages are withheld during a down-
time, should be indemnifiable.
For breeder hens, the crop is fertile eggs. The value of the genetics of the breeder has to be taken
into account. Since some of the breeding chicks are produced as part of integrated operations,
assigning a value to the genetics is not in itself simple.
While there are some parallels between a net present value approach for layers and the methods
used in Federal Crop Insurance to value trees in an orchard, there are also some important
differences. First, the useful life of a layer is much shorter than the useful life of a tree. In some
cases, the productive potential of the tree increases over time (i.e., for some varieties growth and
the increase in productivity is indeterminate). Vertebrates, including fowl, all have a determinate
life cycle. Consequently, there is a definite end to productivity and a decrease in net future value
over time. Nonetheless, a dollar insurance approach for the lost layers, with a number of set
points for value based on age, seems the only reasonable approach short of the one-off
113 Ott, S.L. and K. Bergmeier, 2005, Determining Poultry Indemnity Values: Examples and Lessons Learned from Poultry
Disease Outbreaks in Canada and the United States, Annual Meeting of the Canadian Agricultural Economics Society,
http://ageconsearch.umn.edu/bitstream/34163/1/cp05ot01.pdf, accessed January 2015.
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calculations APHIS uses. Neither a fixed dollar approach nor a variable dollar approach with
limited set points seems likely to satisfy all claimants, but that is true of the current tree-based
coverages as well. Furthermore, either approach will introduce either the opportunity for
beneficial gain or the possibility the insurance will not be considered meaningful. While these
shortcomings inure the use of a net present value approach in any crop insurance context, the
finite and brief lifespan of a productive layer introduces challenges that have not been overcome
previously.
It is important to note farm-level egg prices and values reported by various agencies, including
NASS, include actual, calculated, and estimated values. The prices contract growers receive are
primarily payments for capital and labor services rendered. Since the contracts vary by region
and by grower, the prices may include the costs of other inputs as well. The value integrator
farms receive for the eggs are extrapolated from their overall income associated with production
and processing. The USDA ERS Poultry Yearbooks include national price data through 2004.
The USDA ERS Livestock, Dairy, and Poultry Outlook reports include more recent data for
relative egg prices. There is seasonality in egg prices, with operator costs sometimes exceeding
income during summer months. The seasonal pattern in prices results from the interaction
between the seasonal supply and demand for eggs and egg products.
In 1995 and 2001, the nominal price for table eggs was $0.52 per dozen and $0.47 per dozen,
respectively.114
The ERS Poultry Yearbook reported prices of $0.63 per dozen in 1995 and
$0.62 per dozen those same years and 2004 prices of $0.71 per dozen (Table 22).
114 USDA, NASS, 2002, Prices Received by Farmers: Historic Prices and Indexes 1908–2001.
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Table 22. Poultry Yearbook Egg Prices 1955 to 2004 Year Price per dozen ($/100) Year Price per dozen ($/100) Year Price per dozen ($/100)
1955 39.5 1972 30.9 1989 68.9
1956 39.3 1973 52.5 1990 70.8
1957 35.9 1974 53.2 1991 67.6
1958 38.5 1975 52.4 1992 57.6
1959 31.4 1976 58.3 1993 63.4
1960 36.1 1977 55.6 1994 61.5
1961 35.6 1978 52.2 1995 62.5
1962 33.8 1979 58.3 1996 75
1963 34.5 1980 56.3 1997 74.9
1964 33.8 1981 63.1 1998 66.8
1965 33.7 1982 59.5 1999 62.1
1966 39.1 1983 61.1 2000 61.7
1967 31.3 1984 72.3 2001 62.2
1968 34 1985 57.2 2002 58.9
1969 40 1986 61.5 2003 73.2
1970 39.1 1987 54.7 2004 71.4
1971 31.4 1988 52.8
Source: After USDA, ERS, 2006, Poultry Yearbook (89007), http://usda.mannlib.cornell.edu/usda/ers/89007/table0002.xls, accessed
April 2015.
NASS has numerous reports on egg prices. Summary statistics are available on their Quick Stats
tool (Table 23).
Table 23. Prices Received 1996 to 2014
Year Price
($ per dozen) Year
Price
($ per dozen)
2014 1.26 2004 0.713
2013 1.09 2003 0.746
2012 0.999 2002 0.607
2011 0.968 2001 0.611
2010 0.857 2000 0.635
2009 0.823 1999 0.608
2008 1.06 1998 0.665
2007 0.929 1997 0.696
2006 0.59 1996 0.758
2005 0.545
Source: USDA, NASS, 2015, Quick Stats, accessed May 2015.
NASS does not include the number of egg producers or county-level statistics in its annual
surveys. However, NASS publishes Monthly Chickens and Eggs Reports. The Chickens and
Eggs Reports include information on the current supplies of eggs and on future supplies based on
the size of the laying flock, number of replacement pullets, and placements in breeding flocks.
In December, a full survey targets all flocks in the United States. Many state Agriculture
Statistics Service offices report prices received by farmers for eggs. These are translated by
NASS into prices received by farmers by state. ERS gathers information regarding egg
production and prices through a variety of survey instruments.
Finally, many wholesale egg sales are priced based on contracts tied to the Urner Barry Price-
Current. A range of price data, regionally, by grade, use, and by size (including nest run) are
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available by subscription. While wholesale prices may or may not reflect farm-gate prices, the
datasets have been constructed using consistent processes and algorithms. While historical data
is available from Urner Barry, the Contractor was unable to determine the length and cost of
long-term egg price series.
There are no egg futures contracts traded on organized exchanges. With increased consolidation
and vertical integration, the proportion of eggs exchanged on the spot market is decreasing.
However, the Egg Clearinghouse (a nationally recognized marketplace for both buyers and
sellers of eggs) seems to function reasonably well and continues to have producer confidence as
a price discovery mechanism. Regardless of the data source, it is important to remember there
are regional price differences, as well as price differences based on the market (shell or breaking)
into which the eggs are sold. The reader should note, for many of the largest operations, and
consequently for the majority of eggs produced, the first receiver is part of the same integrated
enterprise that produced the eggs.
For insurance development, some measure of price and productivity based on the data available
would need to be tied to the productive life of the layer killed or depopulated as the result of a
catastrophic disease event. Costs of production budgets are available for layer operations.115
These would need to be updated as part of a development effort. Then a model could be
developed using potential income and costs to establish a net present value per bird. However,
producer dissatisfaction with the APHIS model to establish similar values shows how
challenging development of a price structure for insurance will be.
VI.D. Game Bird Sector
As difficult as it would be to establish prices for broilers, turkeys, and eggs (i.e., layers), the
challenges facing the insurance industry for establishing game bird prices are substantially
greater. In the first place there are numerous species involved. Furthermore, individuals within
a species are sold at different ages. The birds may pass through the hands of several agricultural
producers before being sold for slaughter or release. Finally, it appears there are differences in
price regionally, reflecting both where the birds are raised and transportation costs. There are no
time series data available for the farm-level value of birds in this class. In fact, there are no data
for a single point in time that captures farm-level value for game birds generally.
In many ways the challenges related to establishing game bird prices are analogous to the
challenges related to establishing the prices of nursery stock. In that industry, catalog prices for
wholesale stock are used in lieu of a survey to establish maximum prices for individual species
and size (equivalent to poultry age) classes. Each of these prices is then set as a maximum for
limiting liability based on actual prices received by the insured. The Contractor believes that
contract pricing with caps set based on industry price patterns is the only viable approach for
game bird pricing for a crop insurance product. Any other approach carries too great a risk of
either creating situations where some insureds may obtain a beneficial gain or alternatively
where some prospective insureds will find the available coverage not meaningful because the
available coverage is insufficient.
115 Menon, D. 2009, Economics Of Layer Farming, http://www.slideshare.net/drdgmmrm/economics-of-layer-farming, accessed
May 2015; and Ibarburu, M. and D. Bell, 2014, U.S. and Regional Estimates of Layer Feed Prices, Cost of Producing Eggs,
and Egg Prices, http://www.ans.iastate.edu/EIC/newsletters/LayerFeb2014.pdf, accessed May 2015.
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SECTION VII. RISK ASSESSMENTS
This section of the report addresses the requirement in the contract that: “The Contractor shall
define the economic risks; collect data to identify and quantify these risks; identify data that are
unavailable, but necessary, to quantify these risks; estimate the frequency and severity of the
most important risks that currently are uninsured, classify each of the perils as insurable or
uninsurable and justify the classification of the risk. The Contractor shall also identify man
made or created perils that can affect the commodity and describe when and how these perils can
occur. The Contractor shall also report any history of disaster program payments, including
[Livestock Indemnity Program] LIP, as a result of any action for the past ten years if
available.”116
This contractually required risk assessment has a broader scope than the risks of catastrophic
disease. However, since the focus of the report is on the potential of an insurance offer for losses
due to a catastrophic disease event, the Contractor has provided detailed information about
disease risks in the context of the more encompassing description of risk in the poultry industry
sectors. In 2011, there were 15 avian related diseases the United States was required to report to
the OIE.117
The OIE is recognized as a reference organization by the World Trade Organization
and is the intergovernmental organization responsible for improving animal health. The United
States is one of 178 member countries of the OIE.118
Many of these diseases have never affected
U.S. commercial flocks or have not affected those flocks for years. However, as they affect
poultry somewhere, the globalization of the agricultural economy means there is a small but real
risk that they may affect U.S. flocks in the future.
VII.A. Broiler Sector
Growers are sensitive to the difference between systemic risk and idiosyncratic risk due to their
contractual relationship with integrators. Both broiler price and feed price are subject to market
forces. Together, these risks may lead to considerable income variability in the broiler sector
over time. Output and input price changes do not immediately affect the broiler grower directly,
but over time are manifested through changes in the number of contracts fulfilled each year
based on integrator financial decisions, contract prices, and/or incentive clauses.
Production risks have not changed substantively over the past several decades. However,
changes in the relationship between contract growers and integrators has resulted in many shifts
in risk management responsibility. Understanding risk mitigation for growers requires an
understanding of the contract system. The majority of broiler contracts have a payment structure
commonly known as two-part, piece-rate tournaments. The first part is a fixed base payment for
each pound of live bird delivered to the integrator. The second part is a variable bonus payment
based on the grower’s performance relative to other nearby growers contracting with the same
integrator. Grower performance is measured by a ‘settlement cost,’ which incorporates the
integrator’s costs (feed, chicks, medication, etc.) and the total pounds of live birds produced. An
116 U.S. Department of the Interior, Interior Business Center, ADQ, 2014, Contract # GS-10F-0155P, Section 2.4.1, page 21 of
26. 117 USDA, APHIS, Animal Health, Monitoring and Surveillance, NAHSS, Status of Reportable Diseases in the United States,
http://www.aphis.usda.gov/animal_health/nahrs/downloads/2011_nahrs_dz_list.pdf, accessed January 2015. 118 World Organization For Animal Health, 2015, About, http://www.oie.int/about-us/, accessed January 2015.
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individual grower’s performance is compared to average performance of all growers in the
tournament whose flocks were harvested during a defined interval.119
Although the majority of broiler production is contracted, there are a small number of
independent farms. Some of these poultry producers focus on niche markets, including organic
and kosher chicken meat. These niche poultry producers are vulnerable to risk due to their size
and may have a greater need for insurance than larger, mainstream poultry farms. However,
beyond the existence of these operations, the Contractor obtained little information regarding this
portion of the broiler sector.
Production Risk
Production risks facing broiler growers include weather, disease, feed quality, and chick quality.
Weather-related risk in broiler production is minor compared to similar risks in crop production
with severe weather affecting a small portion of flocks each year.120
Disease risk includes both
catastrophic losses, such as losses to avian influenza, and chronic disease losses, which more
slowly erode profits. Growers are also impacted by the competence of integrators who control
feed and chick quality.121
Under the current contract system, growers cede control of marketing and production
management decisions to the integrator in return for a guaranteed price floor. With payments
based on relative production performance, price risk and the common portion of production risk
are transferred from individual growers, who may be risk averse, to integrators. By some
estimates, as much as 97 percent of the risk borne by broiler producers is shifted from contract
growers to integrators through the typical contract arrangement.122
As described previously,
price risk is transferred from growers to integrators under the two-part, piece-rate tournament
contracts. Therefore, any responsibility for hedging risk lies with integrators who, “…may hold
well-diversified portfolios resulting in little [net] risk-bearing cost.”123
“The risk-bearing cost [to
the integrator] is similarly reduced in multi-product, private companies because these firms
produce diversified portfolios and products.”124
Growers perceive some of the production-related risks they face as disadvantages of the contract
system. Growers are concerned with a system where their payment can be affected because
tournament outcomes can be biased through chick quality and other production inputs, all of
which may be under the exclusive control of integrators.125
Some grower contracts provide
additional grower security through casualty clauses. These clauses indemnify losses arising from
119 Tsoulouhas, T. and T. Vukina, 2001, “Regulating Broiler Contracts: Tournaments versus Fixed Performance Standards,”
American Agricultural Economics Association: 1063-1072; MacDonald, J.M., USDA, ERS, 2008, The Economic
Organization of U.S. Broiler Production, Economic Information Bulletin No. 38.
http://www.ers.usda.gov/media/205671/eib38_1_.pdf, accessed January 2015. 120 Aho, P. and D. Reid, 1988, “Risks and Returns,” Broiler Industry, May, 14-16. 121 Ibid; Taylor, C.R. and D. A. Domina, 2010, Restoring Economic Health to Contract Poultry Production,
http://www.dominalaw.com/documents/Restoring-Economic-Health-to-Contract-Poultry-Production.pdf, accessed January
2015. 122 Knoeber, C.R., and W.N. Thurman. 1995. “Don’t Count Your Chickens…”: Risk and Risk Shifting in the Broiler Industry.
American Journal of Agricultural Economics, 486-496. 123 Ibid. 124 Ibid. 125 Tsoulouhas, T. and T. Vukina, 2001, “Regulating Broiler Contracts: Tournaments versus Fixed Performance Standards,”
American Agricultural Economics Association: 1063-1072.
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natural disaster such as a flood, excessive heat, fire, or losses of potential production. The
casualty clauses in contracts vary by integrator and region.126
One argument against contracts between growers and integrators is the loss of grower/producer
heterogeneity and the resulting control by integrators, leading to potentially negative influences
on supply. Intense competition within the broiler sector has promoted consolidation, creating
several major firms competing for the same national and international markets. Competition also
plays a role in the price structure of the industry. While integrator contracts insulate growers
from the intense competition in the processing industry, growers remain exposed to curtailments
in production by integrators. For example, WATT Poultry USA reported in January 2015,
“…management problems in broiler breeding flocks, … have suppressed productivity.”127
In the
integrated system found in poultry, the broiler breeding flocks may be owned and overseen by
the integrator. Limiting available broiler chicks reduces the number of contracts the integrators
enter into with broiler production farms and thus growers’ revenue is impacted by forces outside
their control. While poultry producers may have had to make similar adjustments, the growers
had no role in the decision making process.
It is useful to keep a sense of the broiler growers’ perspectives on loss severity. A “catastrophic
loss” meant the loss (mortality) of an entire house or flock of birds. With a normal rotation of 4
to 6 flocks per year, 100 percent mortality in 1 flock would reduce annual gross revenue 16 to 25
percent. The timing of such a loss is critical in gauging the overall severity of such an event; the
later in the grow-out cycle such an event occurs, the greater the financial impact. A catastrophic
loss at the end of a grow-out cycle would reduce annual gross revenue by 16 to 20 percent, but
expenses would not be reduced. Consequently, the impact on net revenue would be more severe.
Specifically, ‘Income Above Variable Cost’ and ‘Net Returns Above All Specified Expenses’
would drop by the same amount, but ‘Net Returns Above All Specified Expenses’ would be
decreased by a substantially larger volume. Conversely, if the event occurred early in a grow-out
cycle, expenses would be reduced substantially. If the integrator repopulated the house relatively
soon, the reduction in annual gross revenue could be significantly less and the reduction in net
return would decrease even more quickly. Nonetheless, since disease is a potential cause of
catastrophic loss, disease clean-up procedures generally require an extended layout period,
offsetting any quick repopulation intentions of the integrator.
Further reduction in the “impact” of a total flock loss is possible, given the “typical” broiler
operation, which includes multiple houses. If a loss occurs in one house, the economic effects
are lessened. Conversely, an event that requires closing all houses for an extended period
magnifies the impact of the event. The diseases chosen for this study include both “mortality”
and “production” diseases. Mortality diseases are those avian diseases that result in natural or
unnatural (depopulation orders) death of the bird. Production diseases negatively affect the
birds’ weight gain and/or reproductive abilities thereby rendering the bird of less value to the
integrator. Both types of disease can result in extended layout periods for the grower and
endanger the growers’ revenue and livelihood.
126 MacDonald, J.M., USDA, ERS, 2008, The Economic Organization of U.S. Broiler Production, Economic Information
Bulletin No. 38. http://www.ers.usda.gov/Publications/EIB38/EIB38.pdf, accessed January 2015. 127 Thorton, G., 2015, “US poultry’s slow-mo expansion extends profitability,” WATT PoultryUSA, January. 14-15.
http://www.wattpoultryusa-digital.com/, accessed January 2015.
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Input quality, including the quality of chicks supplied by the integrator, is considered as a peril
by some growers. Chick quality refers to the flock-to-flock variation in the growth rate and
performance of company owned chicks being fed company supplied feedstuffs and medication
while in a grower-owned house, under the grower’s daily care. No quantifiable estimates of
variation are available. One of the criteria for feasibility requires “Losses covered under the
proposed insurance product must be adjustable.” Separately identifying the effects of chick
quality, feedstuff quality, the effect of medication, or a slight change in the functioning of the
grower’s equipment or daily care as the source(s) of production variation is, at least, problematic.
Consequently, input quality cannot be an insurable peril and will not be discussed further.
Similarly, risks arising from EPA regulations, litter and dead bird disposal, energy cost, cost of
operation, and banned antibiotics are elements of management that would not be insurable under
conventional production (yield) insurance structure.
Disease
Disease prevention and control are given continual management attention. Ten of the twelve
diseases considered catastrophic in nature by the broiler industry have an available vaccine.
However, in the case of six of the ten with available vaccines, those vaccines are either
autogenous and not available to all growers or the vaccine is not approved by regulators for use
in broilers. Infectious Laryngotracheitis is the only disease in the list of 12 that has both a
vaccine for an infected bird and for use as a preventive measure. Marek’s disease has an
available vaccine for use as a preventive measure.
Broilers are maintained on litter in a controlled-environment facility where the birds roam freely.
The environment (temperature, humidity, and soiled litter) is conducive to both broiler growth
and to fostering some catastrophic poultry diseases. Thus, an important part of broiler
management is implementation and monitoring of strict medication and disease prevention
procedures and a tight bio-security regimen. An infection from several of these diseases (HPAI,
Exotic Newcastle Disease, etc.) results in mortality or government ordered depopulation of an
entire house or farm, usually followed by quarantine, costly cleanup and disinfection, and a
period of enhanced surveillance. Quarantine and cleanup add a business interruption dimension
to incurred losses as delayed house repopulation (layout) further interrupts the normal annual
cycle.
As presented in Table 24, the NPIP provides guidance to the poultry industry on but a single
disease for testing and sanitation procedures – AI. Interestingly, the protocols provided in the
NPIP are specific to low pathogenic AI. Until the standards specific to HPAI are written and
adopted, APHIS has used the low pathogenic avian influenza response standards as a proxy to
respond to the current outbreak of this disease across the nation.
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Table 24. Broiler Catastrophic Disease List:
Available Vaccinations and NPIP Protocol Inclusion
Disease Vaccine NPIP Protocols
Affected Bird Preventive Prevention Response
Highly Pathogenic Avian Influenza no yes# yes yes
Colibacillosis no yes**** no no
Exotic Newcastle Disease no yes no no
Fowl Cholera no yes**** no no
Gangrenous Dermatitis no yes**** no no
Highly Pathogenic Infectious Bursal
Disease Virus no yes? no no
Infectious Laryngotracheitis yes yes no no
Marek's no yes no no
Necrotic Enteritis no no no no
Runting and Stunting Syndrome no no no no
Uncontrolled Coccidiosis no yes/no no no
Uncontrolled Infectious Bronchitis
Virus no yes/no## no no
#- A commercial vaccine is available, but it is unlikely that regulators will allow its use
##- A commercial vaccine is available unless the virus is a new variant strain
****- Some of these agents do not have a commercial vaccine available, but do use autogenous vaccines to minimize disease impact
Source: Andrew Rhorer, formerly national coordinator and executive secretary of the General Conference Committee of the National Poultry Improvement Plan for APHIS.
Frequency and Severity
Growers and experts offered very general qualitative statements regarding frequency and
severity of disease perils. The only statements made regarding the frequency of disease perils
were generic statements such as “rare.” Income losses resulting from catastrophic disease
outbreaks are generally excluded from indemnification under the conventional loss-of-income
coverage products available. APHIS disease monitoring programs are generally available for
livestock and the NPIP is specific to the poultry industry. Discussions with APHIS staff indicate
that APHIS does not maintain a comprehensive disease occurrence database appropriate for
insurance development inclusive of frequency (time and location) and severity (number of birds
affected, depopulated, cost of depopulation activities, etc.) for any of the NPIP identified poultry
diseases.
The Contractor investigated several alternative sources in an effort to discover data to create a
time series frequency and severity dataset. “The United States Animal Health Association
(USAHA), the nation’s animal health forum for over a century, is a science-based, non-profit,
voluntary organization.”128
Annually, USAHA publishes reports documenting the state of the
industry for poultry and other livestock. Until relatively recently (2009) these reports would
often contain disease occurrence data which included both the location (state/county) and
severity (number of birds affected). These reports currently contain information relative to the
APHIS efforts on behalf of the NPIP surveillance protocols which do not include depopulation
figures. Each depopulation order has an affiliated incident report which may contain severity
and location data which might be used in a development effort to create a database containing
enough information to support frequency and severity determinations for rating purposes.
128 United States Animal Health Association, 2015, USAHA: The Nation’s Animal Health Forum Since 1897,
http://www.usaha.org/AboutUs.aspx, accessed April 2015.
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Creation of this database from incident reports would be a function of a developmental effort and
is outside the scope of this study.
The Contractor also contacted several state government livestock organizations to ascertain their
level of poultry disease tracking. These state organizations also develop incident reports when
diseases are reported. These reports might be used in a development effort to create a database
containing enough information to support frequency and severity determinations for rating
purposes. The creation of this database from isolated reports would be a function of a
developmental effort and is outside the scope of this study.
Federal programs indemnifying the value of birds lost to disaster declarations have generally not
benefited broiler growers because they do not own the birds. The presence of a disease and
associated mortality are certainly identifiable. Underwriting related to vaccination schedules,
sanitation, and management practices is possible. Data are limited. Most chronic diseases are
controllable or manageable, but acute disease like AI are much more difficult to control. The
risks associated with lost production are of less concern to growers than are the risks to the
business and production cycles, including the number and length of layouts.
“Some industry production practices are also the subject of debate regarding public health.
Broilers have long been provided with antibiotic drugs in their feed and water to prevent disease
and to promote more efficient conversion of feed to meat. With growing scientific and public
concern over increased antimicrobial resistance in human and animal pathogens, there is growing
pressure, and a regulatory initiative from the U.S. Food and Drug Administration, to reduce the
use of antibiotic drugs, especially for growth promotion, in livestock and poultry production.”129
Hence, past frequency of disease events may not be predictive of the future frequency.
Weather
During the listening sessions, growers identified two distinct events – severe storms and
extended periods of extreme weather – as the “weather” perils of greatest concern. In the South,
hurricanes and tornados are most likely to damage or destroy houses. In Mid-Atlantic States,
snow storms resulting in accumulations that exceed roof load limits and cause building collapse
are the most damaging. A storm event results in lost revenue from the flock in grow-out,
incurred expenses that will not generate any return, unplanned building repair or replacement
costs, and, possibly, additional lost revenue from interruption of the annual production cycle
during repairs or reconstruction.
Extended periods of severe heat are not considered catastrophic events by growers with modern
houses. Rather, energy costs increase when maintaining proper house temperature and humidity.
Some claim there may be reduced bird grow-out performance and delivery of fewer pounds of
bird leads to reduced base payment revenue. A reduction in the grower’s tournament ranking
due to heat likely results from inferior or outdated house construction because all growers in the
tournament are subject to the same conditions. Indemnifying lost incentive payments
attributable to obsolete facilities would create a disincentive to technological innovation. The
expressed concern was for the loss of future income coverage. No quantitative estimates
129 MacDonald, J.M., USDA, ERS, 2014, Technology, Organization, and Financial Performance in U.S. Broiler Production,
Economic Information Bulletin No. 126. http://www.ers.usda.gov/media/1487788/eib126.pdf, accessed December 2014.
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regarding frequency and severity of losses from weather events were offered by growers or
experts.
Growers and lenders generally considered available property and casualty coverage for house
damage adequate though costly. Participation is this coverage is highly variable, but is distinctly
higher in highly leveraged/low equity operations.
With the data currently available, questions concerning identification and measurement of losses
tied to specific weather events seem problematic. The insurability of electric power loss from
the RMA perspective revolves primarily around the failure of the electrical supply outside the
control of the grower. With existing technology and building design, heat and moisture build-up
following the loss of ventilating and cooling systems measurably affects flock well-being and
consequently production. This is similar to the terms for causes of loss that affect irrigated
acreage. The loss of the irrigation water supply must be due to an insurable cause that occurs
during the insurance period.
Many growers considered power loss a peril to production. For some, power loss is the peril of
greatest concern because they do not have back-up systems. It is an area event, whose frequency
is influenced primarily by the delivery system for commercial power and secondarily by weather
affecting that system. It should be noted that “Failure of, or reduction in, the power supply” is a
covered cause of loss in the Nursery Crop Provisions. Hence, procedures to adjust losses
claimed due to this event already exist.
Weather related property losses would be indemnified under the grower’s usual coverage for
catastrophic events such as fire and building collapse, and some loss of income coverage is
available. Even under a property loss policy, growers would generally not be compensated for
the value of birds lost as the integrator retains ownership of the flock. However, since the
grower does not incur a loss of the value of the birds since he or she has no share in that value,
there is no loss to the grower.
Equipment Failure
Equipment failure is very similar to power loss. The difference is a matter of degree. If a piece
of bird watering or feeding equipment breaks down there may not be the same urgency to
complete repairs as with a loss of power, or for that matter, a controller malfunction. However,
given the inventory of replacement equipment and parts that growers keep as a means of self-
insuring, the Contractor would conclude the events are not trivial, as lack of attention would
transform these situation into catastrophic events. Conversely, if the failed piece of equipment
were an integral part of the environmental control system, then failure could be catastrophic in a
very short time. Insurability issues would be similar to those for weather related power loss.
Failure of the irrigation water supply is a comparable event covered by other crop insurance
policies.
VII.B. Turkey Sector
Turkey growers are subject to similar risks faced by the growers of broilers. Growers are
sensitive to the difference between systemic risk and idiosyncratic risk as a result of their
contractual relationship with integrators. Part of the production risk is idiosyncratic and affects
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only a single grower (as when an automatic feeder breaks down), but part is common and affects
many growers (as when the ambient air temperature becomes very high). There is also a price
risk. Both turkey price and feed price are subject to market forces. Together, these risks may
lead to considerable income variability in the turkey sector over time. Output and input price
changes do not directly and immediately affect the turkey grower, but over time they are
manifested through changes in the number of contracts, contract prices, and/or incentive clauses.
Grower risks have not changed substantively over the past several decades. However, the
relationship between contract growers and integrators has resulted in many shifts in risk
management responsibility.
Although the majority of turkey production is contracted, there are a number of independent
farms and cooperatives. Some of the poultry producers focus on niche markets, including
organic and kosher turkey meat. These niche poultry producers are vulnerable to risk as a result
of their size and may have a greater need for insurance than larger, mainstream poultry farms.
However, beyond the existence of these operations, the Contractor obtained little information
regarding this portion of the turkey sector.
Production Risk
Production risks facing turkey growers include weather, disease, feed quality, and chick quality.
Weather-related risk in turkey production is minor compared to similar risks in crop production
with severe weather affecting a small portion of one flock out of five or six each year.130
Disease
risk includes both catastrophic losses, such as losses to END and AI, and chronic disease losses,
which more slowly erode profits. Growers are also impacted by the competence of integrators
who control feed and chick quality.
Under the current contract system, growers give up control of marketing and production
management decisions in return for a guaranteed price. With payments based on relative
production performance, price risk and the common portion of production risk are transferred
from individual growers, who may be risk averse, to integrators. Growers perceive some risk-
related disadvantages in the contract system. Production contracts may provide additional
grower security through casualty clauses. These clauses would indemnify losses arising from
natural disaster such as a flood, excessive heat, fire, or losses of potential production.
Although growers do not bear price risk directly, they are dependent on integrators for stock to
grow-out. Given the competitive nature of the turkey processing industry, growers can
experience lower revenues through reduced production industry-wide, lack of competition
among integrators, and integrator failure or default. Like the broiler market, the turkey market
has experienced less price appreciation over time than some other agricultural sectors.
Consequently, competitors in the turkey production sector are focused on increasing the weight
gain rate and weight gain efficiency of the turkeys being raised.
Disease
Disease prevention and control are given continual management attention in the turkey sector.
Ten of the seventeen diseases considered catastrophic in nature by the turkey industry have an
130 Aho, P. and D. Reid, 1988, “Risks and Returns,” Broiler Industry, May, 14-16.
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available vaccine (Table 25) though in eight of the ten with available vaccines, those vaccines
are either autogenous, and not available to all growers, or the vaccine is not approved by
regulators for use in turkeys. Exotic Newcastle Disease and Uncontrolled Coccidiosis are the
only two diseases of the 17 listed that have an available vaccine for use as a preventive measure
unencumbered by prohibitive regulatory use restrictions. There are no vaccines for any of the 17
diseases on the list available for use on affected birds.
While a limited number of turkeys are pastured (raised primarily outdoors with free access to
natural food and conditions), most turkeys are maintained on litter in pole barns or controlled-
environment facilities where the birds roam freely. The environment (temperature, humidity,
and soiled litter) is conducive to both turkey growth and to fostering certain poultry diseases.
Thus, an important part of management is implementation and monitoring of strict medication
and disease prevention procedures and a tight bio-security regimen. With those practices in
place, diseases of particular concern are catastrophic diseases such as AI, particularly the highly
pathogenic form, and END. An infection from these diseases results in mortality or depopulation
of an entire house, usually accompanied by quarantine and costly cleanup and disinfection.
Quarantine and cleanup add a business interruption dimension to incurred losses as delayed
house repopulation interrupts the normal annual cycle. However, it is important to note that such
events, while extremely severe, are extremely rare.
As presented in Table 25, the NPIP provides guidance to the poultry industry on 4 of the 17
catastrophic diseases for testing and sanitation procedures – H3N2 Influenza, HPAI,
Mycoplasma gallisepticum, and Mycoplasma synoviae. Interestingly, the Federal Drug
Administration removed the vaccine for Histomoniasis (Blackhead) from the available vaccines
for use by turkey producers. In listening session interactions, turkey growers mentioned that
their counterparts in the European Union still have access to and use this vaccine.
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Table 25. Turkey Catastrophic Disease List:
Available Vaccinations and NPIP Protocol Inclusion
Disease Vaccine NPIP Protocols
Affected Bird Preventive Prevention Response
H3N2 Influenza no yes* yes yes
Highly Pathogenic Avian Influenza no yes** yes yes
Mycoplasma gallisepticum (MG) no no yes yes
Mycoplasma synoviae (MS) no no yes yes
Avian Metapneumovirus (AMPV) no yes*** no no
Blackhead (Histomoniasis) no no no no
Bordetella avium (BART) no yes*** no no
Cellulitis no yes*** no no
Colibacillosis no yes*** no no
Exotic Newcastle Disease no yes no no
Fowl Cholera no yes*** no no
Necrotic Enteritis no no no no
Ornithobacterium rhinotracheale (ORT) no yes*** no no
Poult Viral Enteritis no no no no
Reoviral Tenosynovitis no no no no
Turkey Coronavirus no no no no
Uncontrolled Coccidiosis no yes no no
* Vaccine is used in breeders only to minimize egg production drop
** A commercial vaccine is available, but it is unlikely that regulators will allow its use
*** Some of these agents do not have a commercial vaccine available, but do use autogenous vaccines to minimize disease impact
Source: Andrew Rhorer, formerly national coordinator and executive secretary of the General Conference Committee of
the National Poultry Improvement Plan for APHIS.
Frequency and Severity
Growers and experts offered very general qualitative statements regarding frequency and
severity of disease perils. The only statement made regarding the frequency of disease perils is
that these events are rare. As experienced by the Pennsylvania poultry industry in the mid-
1980’s and again by the national poultry industry in 2015, these rare events can be extremely
severe. Income losses resulting from catastrophic disease outbreaks are generally excluded from
indemnification under the conventional loss-of-income coverage products identified. There are
APHIS disease monitoring programs and, specific to the poultry industry, the NPIP. Federal
programs indemnifying the value of birds lost to disaster declarations provide no benefit to
contract growers who do not own the birds. APHIS managed disaster payments only provide
compensation for poultry destroyed under an order from the U.S. Government and do not
generally cover losses to the disease itself prior to the time a (Veterinary Service) VS 1-23 form
is submitted to APHIS. APHIS also reserves the right to determine the value of the poultry it
destroys when determining the compensation amount.
The presence of a disease and associated mortality are certainly identifiable. Underwriting
related to vaccination schedules, sanitation, and management practices should be possible. Data
are limited. Most chronic diseases are controllable or manageable. The risks associated with
lost production are of less concern to growers than are the risks to the business and production
cycles.
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Weather
During the listening sessions, growers identified cold as the “weather” peril of greatest concern.
The cold did not directly affect the birds, but instead had a major impact on energy costs, and
consequently on total production costs. Extended periods of severe heat or cold are not
considered catastrophic events by growers with modern houses. Rather, energy costs increase
when maintaining proper house temperature and humidity. No quantitative estimates regarding
frequency and severity of losses from weather events were offered or obtained.
As in the broiler sector, new controlled environment (closed) houses for turkeys have greater,
more consistent power requirements than do the older, open-design houses. These added power
demands arise from year-round operation of ventilation systems to remove moisture and heating
and cooling systems to maintain consistent interior temperatures. The primary benefit of higher
power consumption is reduced variation (more precise predictability) in grow-out performance
than can be achieved with older technology. With existing technology and building design, heat
and moisture build-up following the loss of ventilating and cooling systems measurably affects
flock well-being and consequently production.
Property losses would be indemnified under the grower’s coverage for catastrophic losses caused
by weather and physical equipment failures, and some loss of income coverage is available as
riders to those policies. Growers generally consider available property and casualty coverage for
house damage due to severe weather adequate. No growers reported purchasing available
income-protection coverage. They noted they had difficulty hedging risk associated with
temperature and disease.
Morbidity and Mortality
Turkeys develop over a substantially longer period of time than broilers and (particularly among
toms) have a higher mortality rate during periods of normal grow-out. While the production
practices are fundamentally similar, the longer timeline means that any risks or challenges with
any aspect of production can have a more pronounced impact on final outcomes. As a result,
anecdotal testimony suggests that mortality-based variability in production is much greater from
flock to flock in turkeys than in broilers.
VII.C. Layer Sector
Like other agricultural enterprises, layer growers and producers are exposed to production risks
such as disease and weather. Producers also face price or market risks for outputs and
production inputs. The risks faced by egg producers and growers are similar to those faced by
broiler growers, except in many cases the egg producers and growers are also the processors.
Furthermore, the industry has a much larger population of producers, many of whom buy their
feed on the open market. However, as noted in the stakeholder input section for this sector, these
operators are aware of futures markets for feed and energy and some do hedge their input price
risk.
Production Risk
Contract egg growers and producers face similar risks to those faced by the contract growers in
the broiler and turkey sectors. The unique element of the layer sector is the greatly vertically
integrated operator (i.e., grower/integrator). Even relatively small egg producers may be
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vertically integrated. Producers, and to a lesser extent growers, may own or control feed milling,
grading, breaking and processing facilities, and distribution resources. By owning assets in the
value chain, these producers and growers better control cost structures. While becoming
vertically integrated has helped layer enterprises manage cost structures, they are now
responsible for managing all risks at many levels in the value chain. In addition, this high level
of integration results in far less interaction between individual operations, and thus greatly
reduces the potential for inadvertent exposure to disease vectors from neighboring operations.
Disease
Although many ailments can impact flock production, two viral disease risks are of particular
concern: END and AI. END is dispersed as an aerosol in feces and from the respiratory tract of
infected birds. Consequently, the virus is easily spread, contaminating feed, water, footwear,
clothing, tools, equipment, and the environment. Most END-infected chickens eventually die.
Recommended practices for preventing the spread of END include the following:
Vaccination;
Isolating the facility;
Reducing introduction of potential carriers such as birds, people, and vegetation;
Controlling farm traffic and employee travel; and
Maintaining sanitation standards for buildings, organic matter, equipment, and vehicles.
Disease prevention and control are given continual management attention. Twelve of the
fourteen diseases considered catastrophic in nature by the layer industry have an available
vaccine (Table 26) though in three of the twelve with available vaccines, those vaccines are
either autogenous, and not available to all growers, or the vaccine is not approved by regulators
for use in layers. Infectious Laryngotracheitis is the only disease in the list of 14 that has both a
vaccine for an infected bird and for use as a preventive measure. For layers, there are eight
catastrophic diseases with an available vaccine for use as a preventive measure.
As presented in Table 26, the NPIP provides guidance to the poultry industry on two catastrophic
diseases for testing and sanitation procedures – HPAI and Salmonella enteritidis. Interestingly,
as noted earlier, the protocols provided in the NPIP are specific to low pathogenic avian
influenza. Until the standards specific to HPAI are written and adopted, APHIS has used the low
path response standards as a proxy to respond to the current outbreak of this disease across the
nation.
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Table 26. Layer Catastrophic Disease List:
Available Vaccinations and NPIP Protocol Inclusion
Disease Vaccine NPIP Protocols
Affected Bird Preventive Prevention Response
Highly Pathogenic Avian Influenza no yes# yes yes
Salmonella enteritidis (SE) no yes## yes yes
Chicken Anemia Virus no yes no no
Colibacillosis no yes**** no no
Exotic Newcastle Disease no yes no no
Fowl Cholera no yes**** no no
Fowl Coryza no yes no no
Infectious Laryngotracheitis yes yes no no
Marek's no yes no no
Necrotic Enteritis no no no no
Uncontrolled Coccidiosis no yes no no
Uncontrolled Infectious Bronchitis Virus no yes no no
Urolithiasis/Gout no no no no
Very Virulent Infectious Bursal Disease no yes no no
# - While a vaccine is available for prevention, it is unlikely that regulatory officials will allow its use
## - Salmonella enteritidis generally doesn't cause significant disease in the bird, however, the vaccine may significantly
reduce egg transmission **** - Some of these agents do not have a commercial vaccine available, but do use autogenous vaccines to minimize
disease impact Source: Andrew Rhorer, formerly national coordinator and executive secretary of the General Conference Committee of the
National Poultry Improvement Plan for APHIS.
Frequency and Severity
Growers and experts offered very general qualitative statements regarding frequency and
severity of disease perils. As with the other poultry industry sectors, the only statements made
regarding the frequency of disease perils were generic statements such as rare. While the 2015
HPAI losses changed the perception of risks from catastrophic disease, the outbreaks are
historically rare. The timing of the HPAI outbreak has likely influenced grower and producer
concerns about catastrophic disease risks.
Income losses resulting from catastrophic disease outbreaks are generally excluded from
indemnification under the conventional loss-of-income coverage products available as riders to
catastrophic event coverage. APHIS disease monitoring programs are generally available for
livestock and the NPIP is specific to the poultry industry. Though discussions with APHIS staff
indicate that APHIS does not maintain a disease occurrence database inclusive of frequency
(time and location) and severity (number of birds affected, depopulated, cost of depopulation
activities, etc.) for any of the NPIP identified poultry diseases. There may be a way to develop a
database of severity for an outbreak of a catastrophic disease from APHIS Stakeholder
Registry131
reports provided periodically by APHIS during an outbreak (Appendix D).
Development of this database is outside the scope of this study.
Historically, federal indemnification for catastrophic disease has been through APHIS or state
sponsored ad hoc disaster programs. When disease outbreaks result in disaster declarations and
quarantine areas, owners of birds may be eligible for payments reflecting the value of birds
131 USDA, APHIS, 2013, USDA Expands Animal and Plant Health Stakeholder Registry,
http://www.aphis.usda.gov/wps/portal/?1dmy&urile=wcm%3Apath%3A/APHIS_Content_Library/SA_Newsroom/SA_News
/SA_By_Date/SA_2012/SA_11/CT_Gov_delivery, accessed June 2015.
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destroyed as determined by APHIS. Those payments are the current value of the birds not the
value at harvest. Furthermore, such payments do not always compensate for clean-up costs,
costs associated with unplanned depopulation and repopulation, or any part of discounted future
production not captured in the declared value of birds destroyed.
Weather
Heat stress is no longer reported as a common weather-related cause of loss in the layer sector.
While mortality due to overheating resulted in substantial losses to production, production
efficiency losses also occurred, including reduced growth rates, lower egg production, reduced
shell quality, and smaller egg size. Producers and growers minimize losses from heat stress by
utilizing heat-reducing building features promoting radiant heat management and proper
ventilation, providing additional calcium and phosphorus in feed rations, and allowing access to
feed during cooler times of the day.
With the exception of losses to major disease outbreaks, egg growers and producers have
relatively predictable revenue streams, and are therefore able to leverage the business and hedge
risks. Many egg producers have geographically diverse enterprises both within counties and
between counties and/or states.
Power/Equipment Failure
Power failure and equipment failure are not identical. The difference is in the time between a
failure and when losses in production are measurable. Given the controlled environment
technology of modern facilities in which layers are housed, power failure is a term used to
describe a sequence of very specific events. Nearly all systems within the house have redundant
back-up systems in place. Consequently, power failure means both that the delivery of
commercial power has been interrupted and at least one of the automatically switched standby
generating systems has failed. Privately offered loss of income coverage is available that
indemnifies the estimated value of the lost production. Available named peril insurance
coverage for the value of the hens and to some extent loss of income generally requires two
automatically switched, rather than manually activated, back-up generating systems.
Much of the operating equipment has alarms triggered by any malfunction. There is often either
a back-up piece of equipment in place or in inventory. The sense of urgency in repair depends
on the specific piece of equipment. If the equipment is part of the climate control system, then
the event is no different in consequence than power loss. If the equipment is part of the hen
watering or feeding systems, then the urgency for repair is reduced, but cannot be delayed for
long without some production loss. In terms of severity, an extended power failure would nearly
always be catastrophic, resulting in mortality of the entire flock of hens in the affected house(s).
Equipment failure is likely to be catastrophic only if the piece of equipment was part of the
climate control system and repair or replacement was not possible.
Price or Market Risk
Feed costs amount to as much as two-thirds of the total production cost of eggs. In layer
production, a rise in corn and soybean-meal prices can be financially devastating. Egg producers
and growers are always “short” grain by definition. Large layer enterprises can manage their
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feed costs through hedging on the Chicago Board of Trade. Long futures hedges and long call
options hedges can help to manage some of the feed cost risks.
Shell egg transactions at all levels are typically priced by formulae using the wholesale-level
price quotations published in Urner Barry’s Price-Current. Urner Barry reports prices from daily
Egg Clearinghouse, Inc. (ECI) trading and pricing information involving farms with more than
one million birds. Producers utilize the Urner Barry pricing indexes and trading volumes to
assess and manage price and market risk in both the short and long term.
Market period risk is price and/or quantity change during the marketing process. With industry
consolidation, the market period has been shortened and the number of actual transactions has
been reduced as most eggs pass from the farm to the processor (both of which are likely elements
of the same enterprise). Historically, the volume of all sales into the retail markets is more
variable than the volume moving off farms.
Institutional Risk
Animal welfare husbandry standards influence the layer sector more than the broiler or turkey
sectors, as most layers are housed in cages. United Egg Producers (UEP) developed husbandry
standards in 2002 following efforts begun in 1999 with the formation of an independent
scientific advisory committee charged with reviewing all scientific literature on animal well-
being for egg-laying hens. UEP then prepared industry guidelines (i.e., “Animal Husbandry
Guidelines for U.S. Egg Laying Flocks”). These guidelines are used in a program called “United
Egg Producers Certified.” Growers who participate in the UEP certification program are
inspected annually by independent auditors. California’s Proposition 2 (implemented in January
2015) has the potential to substantially distort the market as much more stringent animal welfare
requirements are imposed in that state and in any state supplying eggs to California but not in
others. In 2014, Nebraska, Alabama, Oklahoma, Kentucky, and Iowa joined Missouri “in a
lawsuit against California over its law requiring more space for all egg-laying hens. The
standards apply to all eggs produced within the state as well as eggs produced in any other states
but sold in California.”132
In 2015, these same states appealed a lower court ruling against their
2014 lawsuit; the appeal is pending.133
In any case, the implementation of the law has had a
distorting effect in the largest market for table eggs in the United States by reducing the supply
of eggs causing the price of eggs in California to rise while increasing the availability of eggs,
thereby reducing prices, in other markets.134
Large institutional buyers also negotiate separate animal welfare policies as elements of their
purchase contracts. The Federal government issued final rules for the “Egg Safety Final Rule” in
2009.135
Regulations are political or market outcomes that are clearly not insurable perils even
132 USSOY.ORG, Agri Pulse, Agri-Pulse Communications, Inc., Sarah Gonzalez, March 2014, http://www.agri-pulse.com/Six-
states-join-lawsuit-against-California-egg-law-3-6-2014.asp, accessed April 2015. 133 KCET, Living, Food, Food Rant, Rick Paulas, 6 States Appeal California’s Humane Egg Law,
http://www.kcet.org/living/food/food-rant/six-states-appeal-californias-humane-egg-law.html, accessed April 2015. 134 Ibid. 135 FDA, Department of Health and Human Services, 2009, Prevention of Salmonella enteritidis in Shell Eggs During
Production, Storage, and Transportation; Final Rule, http://edocket.access.gpo.gov/2009/pdf/E9-16119.pdf, accessed April
2015.
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though they commonly require management attention, resource expenditures, and some level of
compliance.
VII.D. Game Bird Sector
In some ways game bird growers are more subject to the risks of disease than other poultry
enterprises. Production risks, like other agricultural enterprises, and weather related risks are
also an ever present threat for a game bird operation. Price or market risks for outputs and
production inputs are relatively similar to those faced by the other poultry sectors. The risks
faced by game bird producers and growers are similar to those faced by chicken and turkey
growers, recalling that producers are the owners of the bird. Similar to many egg producers and
growers, game bird growers tend to buy their feed on the open market. However, most game
bird operations are small enough where hedging these purchases on the futures market is not
practical.
Production Risk
Game bird growers and producers are, for the most part, responsible for finding and fostering
markets for their product. Many operators have developed niche clientele for delivery of both
meat (restaurants, live markets, and specialty grocery markets) and live birds for hunting (state
game and fish departments, local hunting preserves, etc.). These agreements and arrangements
are both verbal and written though the industry is rapidly moving to written contracts being the
norm. Production contracts generally include negotiated price, delivery dates, and number of
birds contracted for delivery. Since most of these operators do not require or own feed mills and
other production input facilities, they are subject to production risks associated with feed prices,
chick replacement, litter prices, etc. This relatively low level of integration results in added risk
for introduction of disease vectors from neighboring and supply operations.
Disease
Interestingly, the game bird and waterfowl industry faces more diseases considered catastrophic
and included in the NPIP than any other sector. Waterfowl diseases of concern include four
identified in the NPIP: H3N2 Influenza, Mycoplasma gallisepticum, HPAI, and Mycoplasma
synoviae. For other game birds, the list includes: HPAI, and Mycoplasma synoviae. Disease
prevention and control are given continual management attention in the game bird sector. All 12
of the diseases considered catastrophic in nature by the waterfowl industry have available
vaccines (Table 27), though 9 of those 12 vaccines are either autogenous, and not available to all
growers, or the vaccine is not approved by regulators for use in various waterfowl. There are no
vaccines available for waterfowl affected by any of these 12 diseases.
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Table 27. Waterfowl Catastrophic Disease List:
Available Vaccinations and NPIP Protocol Inclusion
Disease
Vaccine NPIP Protocols
Affected
Bird Preventive Prevention Response
H3N2 Influenza no yes* yes yes
Highly Pathogenic Avian Influenza no yes# yes yes
Mycoplasma gallisepticum (MG) no yes yes yes
Mycoplasma synoviae (MS) no yes yes yes
Avian Metapneumovirus (AMPV) no yes* no no
Colibacillosis no yes* no no
Exotic Newcastle Disease no yes no no
Fowl Cholera no yes* no no
Necrotic Enteritis no yes* no no
Ornithobacterium rhinotracheale (ORT) no yes* no no
Riemerella anatipestifer no yes* no no
Uncontrolled Coccidiosis no yes** no no
* Some of these agents do not have a commercial vaccine available, but do use autogenous vaccines to minimize disease impact.
** While a vaccine is available for prevention, it is unlikely that regulatory officials will allow its use.
Source: Andrew Rhorer, formerly national coordinator and executive secretary of the General Conference Committee of the National Poultry Improvement Plan for APHIS.
There are 15 of the 19 diseases considered catastrophic in nature by the game bird industry that
have an available vaccine (Table 28) though in 8 of the 15 with available vaccines, those
vaccines are either autogenous, and not available to all growers, or the vaccine is not approved
by regulators for use in various game birds. Botulism is the only disease identified that has a
vaccine available for use on affected birds.
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Table 28. Game Bird Catastrophic Disease List:
Available Vaccinations and NPIP Protocol Inclusion
Disease Vaccine NPIP Protocols
Affected Bird Preventive Prevention Response
Highly Pathogenic Avian Influenza no yes*** yes yes
Mycoplasma gallisepticum (MG) no yes yes yes
Mycoplasma synoviae (MS) no yes yes yes
Avian Metapneumovirus (AMPV) no yes**** no no
Blackhead (Histomoniasis) no no no no
Bordetella avium (BART) no yes no no
Botulism, yes no no no
Colibacillosis no yes**** no no
Erysipelas rhusiopathiae no no no no
Exotic Newcastle Disease no yes no no
Fowl Cholera no yes**** no no
Fowl Coryza no yes no no
H3N2 Influenza no yes### no no
Marble Spleen no yes## no no
Necrotic Enteritis no yes**** no no
Ornithobacterium rhinotracheale (ORT) no yes**** no no
Quail Bronchitis virus no yes**** no no
Ulcerative Enteritis no no no no
Uncontrolled Coccidiosis no yes***# no no
*** - While a vaccine is available for prevention, it is unlikely that regulatory officials will allow its use
**** - Some of these agents do not have a commercial vaccine available, but do use autogenous vaccines to minimize disease impact
# - Chukars ## - Pheasants
### - Wild turkeys
Source: Andrew Rhorer, formerly national coordinator and executive secretary of the General Conference Committee of the National Poultry Improvement Plan for APHIS.
Unlike the birds in other commercial poultry sectors, most game birds are raised in outdoor or
mostly outdoor environments in flight pens with access to natural lighting and with adequate
space to encourage flight training and strengthening. The environment (temperature, humidity,
and access to wild birds) is conducive to both game bird growth and to fostering certain poultry
diseases. Thus, an important part of management is implementation and monitoring of strict
surveillance and disease prevention procedures and a tight biosecurity regimen. With those
practices in place, diseases of particular concern are catastrophic diseases such as AI, particularly
the HPAI form, Mycoplasma gallisepticum, and Mycoplasma synoviae. An infection from these
diseases results in mortality or ordered depopulation of an entire house, usually accompanied by
quarantine and costly cleanup and disinfection. Quarantine and cleanup add a business
interruption dimension to incurred losses as delayed house repopulation interrupts the normal
production cycle. However, it is important to note that such events, while extremely severe, are
extremely rare. The NPIP provides guidance to the poultry industry on only a few of the
identified catastrophic diseases for testing and sanitation procedures – H3N2 Influenza, HPAI,
Mycoplasma gallisepticum, and Mycoplasma synoviae.
Historically, as with the other poultry industry sectors, federal indemnification for catastrophic
disease has been through APHIS or state sponsored ad hoc disaster programs. When outbreaks
result in disaster declarations and quarantine areas, owners of birds may be eligible for payments
reflecting the value of birds destroyed. Those payments are the current value of the birds not the
value at harvest. Furthermore, such payments do not compensate for clean-up costs, costs
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associated with unplanned depopulation and repopulation, or any part of discounted future
production not captured in the declared value of birds destroyed.
Weather
Heat stress still remains a common weather-related cause of loss in the game bird sector. While
mortality due to overheating resulted in substantial losses to production, production efficiency
losses also occurred, including reduced growth rates, lower egg production, reduced shell
quality, and smaller egg size. Producers and growers minimize losses from heat stress by
utilizing heat-reducing building features promoting radiant heat management and proper
ventilation, providing additional calcium and phosphorus in feed rations, and allowing access to
feed during cooler times of the day.
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SECTION VIII. RESEARCH FINDINGS
The sheer size and the complexity of the poultry sector are two defining features of the industry.
Poultry species raised for meat in the United States include ducks, geese, pheasant, pigeon, quail,
turkeys, chickens, chukars, emu, guinea fowl, ostrich, partridge, pea fowl, rhea. The 2012
Census reports the poultry industry had a value of $43 billion (11 percent of the $395 billion
value reported for the entire agriculture economy) in 2012.136
In addition to this considerable
farm-level value documented in the Census there is a substantial processing added-value
component in virtually all poultry sectors. Much of this added value accrues to integrators, who
in many cases are the owners of the birds.
Industry Structure
Many elements of the poultry industry are vertically integrated. Fewer than 100 very large firms
have ownership over elements of production, marketing, and sales in the meat sectors of the
poultry industry collectively. Integrators for poultry meat production may control feed
production, brood egg production, hatching, grow-out, transportation, slaughter, initial
processing (preparation of a marketable whole bird), further processing to retail products such as
lunch meat, and wholesale distribution. Integrators and producers for egg production may
control feed production, layer, hatching, and grow-out, transportation, processing, and wholesale
distribution. Consequently, major sector stakeholders have a remarkable control of their
products and vast market power relative to the contract growers who are responsible for
managing the development of a day-old bird into a marketable product. Even relatively small
egg and poultry producers/integrators often own and manage a variety of the elements of their
businesses (e.g., rearing of birds, feeding, housing, husbandry, and marketing of their product).
One area where integrators manage costs is in payments made to growers. Growers have often
borrowed heavily to build poultry houses or to upgrade the houses to meet the requirements of
the integrator. Poultry houses are very specialized farm structures; there are few alternate uses
for these structures. The low margins and the limited options create a situation where downtime
is a major concern. Yet the appropriate response to a catastrophic disease event is to impose a
longer downtime than would generally be utilized between healthy flocks as the houses are
decontaminated and tested.
Within the broader poultry industry there are sectors which are less fully integrated. One such
sector is the breeders of species other than chickens and turkeys. Such operations may be quite
similar to a typical farm operation. Their control of the genetics provides special status within
the industry. Furthermore, smaller niche markets for free-range, kosher, and halal production,
and to some extent organic production, also support less integrated operations. However, the
higher prices for these niche market products are attracting the interest of the larger integrators.
Grading Standards
The contract requires documentation of the grading standards for poultry. AMS maintains the
classes, standards, and grades for poultry produced for marketing in the United States. AMS
provides several manuals to assist inspectors, producers, integrators, educators, and consumers
understand and apply these standards to the poultry product.
136 After USDA, NASS, 2012 Census of Agriculture, Tables 1 and 2, pages 7 and 9,
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf, accessed April 2015.
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The USDA AMS Poultry-Grading Manual establishes “a guide to the uniform application of the
U.S. Department of Agriculture (USDA) classes, standards, and grades for poultry, and to
USDA’s voluntary poultry grading and certification services.”137
The United States Classes,
Standards, and Grades for Poultry, AMS 70.200 et seq. contains information on the grading
program used by the USDA to “establish a basis for quality and price relationship and enable
more orderly marketing. Consumers can purchase officially graded product with the confidence
of receiving quality in accordance with the official identification.”138
Both these documents
provide the poultry industry with a uniform approach to grading the meat elements of the poultry
markets.
Poultry are broken into six types and then into sub-categorizations called classes. The types
identified in the AMS documents are: chickens, turkeys, ducks, geese, guineas, and pigeons.
The classes of chicken include: Rock Cornish game hen or Cornish game hen; Rock Cornish
fryer, roaster, or hen; broiler or fryer; roaster or roasting chicken; capon; hen, fowl, or baking or
stewing chicken; and cock or rooster. For turkeys, the classes are: fryer-roaster turkey; young
turkey; yearling turkey; and mature turkey or old turkey (hen or tom). Ducks are classified as:
broiler duckling or fryer duckling; roaster duckling; and mature duck or old duck. Geese have
two classes: young goose and mature goose or old goose. Guineas also have two classes: young
guinea and mature guinea or old guinea. The final type, pigeons, is classified as squab or pigeon.
There are 20 “cuts” which are graded for poultry. When grading the quality of Ready-to-Cook
Poultry (Table 29), inspectors are instructed to grade nine areas of the carcass: conformation;
fleshing, fat covering, defeathering, exposed flesh, disjointed and broken bones and missing
parts, discolorations, freezing defects, and backs. Depending on the quality of the carcass in
each of these inspection areas, the carcass is graded as A Quality (U.S. Grade A), B Quality
(U.S. Grade B), or C Quality (U.S. Grade C).
137 USDA, AMS, Agriculture Handbook Number 31, Poultry-Grading Manual,
“http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3002393, accessed May 2015. 138 USDA, AMS, Marketing and Regulatory Programs, Poultry Programs, September 5, 2002, United States Classes, Standards,
and Grades for Poultry, AMS 70.200 et seq, http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004377,
accessed May 2015.
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Table 29. Ready-to-Cook Poultry - A Quality Summary of Specifications for Standards of
Quality for Individual Carcasses and Parts A Quality
Conformation:
Breastbone
Back
Legs and Wings
Normal
Slight curve or dent Slight curve
Normal
Fleshing: Well fleshed, considering kind and class
Fat Covering: Well developed layer – especially between heavy feathers tracts
Defeathering:
Free of protruding feather and
hairs
Turkeys
(feathers less than ¾ in.)
Carcass Parts
Ducks and Geese 1
(feathers less than ½ in.)
Carcass Parts
All Other Poultry
(feathers less than ½ in.)
Carcass Parts
4 2 8 4 4 2
Exposed Flesh:2
Weight Range
Minimum Maximum
Carcass Large Carcass Parts 3
(halves, front and rear halves) Other Parts 3
Breast and Legs Elsewhere Breast and Legs Elsewhere
None
Over 2 lbs. Over 6lbs.
Over 16lbs.
2lbs.
6lbs. 16lbs.
None
¼ in.
¼ in. ½ in.
½ in.
1 in.
1 ½ in. 2 in.
3 in.
¼ in.
¼ in. ½ in.
½ in.
½ in.
¾ in. 1 in.
1 ½ in.
¼ in.
¼ in. ½ in.
½ in.
Discolorations:
Carcass Lightly Shaded Moderately Shaded 4
Breast and Legs Elsewhere Hock of Leg Elsewhere
None Over 2 lbs.
Over 6lbs.
Over 16lbs.
2lbs. 6lbs.
16lbs.
None
¾ in. 1 in.
1 ½ in.
2 in.
1 ¼ in. 2 in.
2 ½ in.
3 in.
¼ in. ½ in.
¾ in.
1 in.
5/8 in. 1 in.
1 ¼ in.
1 ½ in.
Discolorations:
Large Carcass Parts
(halves, front and rear halves)
Lightly Shaded Moderately Shaded 4
Breast and Legs Elsewhere Hock of Leg Elsewhere
None
Over 2 lbs.
Over 6lbs. Over 16lbs.
2lbs.
6lbs.
16lbs. None
½ in.
¾ in.
1in. 1 ¼ in.
1 in.
1 ½ in.
2 in. 2 ½ in.
¼ in.
3/8 in.
½ in. 5/8 in.
½ in.
¾ in.
1 in. 1 ¼ in.
Discolorations:
Other Parts Lightly Shaded Moderately Shaded 4
None
Over 2 lbs.
Over 6lbs. Over 16lbs.
2lbs.
6lbs.
16lbs. None
½ in.
¾ in.
1 in. 1 ¼ in.
¼ in.
3/8 in.
½ in. 5/8 in.
Disjointed and Broken Bones: Carcass—1 disjointed and no broken bones. Parts—Thighs with back portion, legs, or leg quarters may
have femur disjointed from the hip joint. Other parts—none.
Missing Parts: Wing tips and tail. In ducks and geese, the parts of the wing beyond the second joint may be removed if removed at the joint and both wings are so treated. Tail may be removed at the base.
Freezing Defects: Slight darkening on back and drumstick. Overall bright appearance. Occasional pock-marks due to
drying. Occasional small areas of clear, pinkish, or reddish-colored ice.
1 Hair or down is permitted on the carcass or part, provided the hair or down is less than 3/16 inch in length, and is scattered so that the carcass or part has clean appearance, especially on the breast and legs. 2 Maximum aggregate area of all exposed flesh. In addition, the carcass or part may have cuts or tears that do not expand or significantly expose flesh, provided the aggregate length of all such cuts and tears does not exceed a length tolerance equal to the permitted dimensions listed above. 3 For all parts, trimming of skin along the edge is allowed, provided at least 75 percent of the normal skin cover associated with the part remains attached, and the remaining skin uniformly covers the outer surface and does not detract from the appearance of the part. 4 Moderately shaded discolorations and discolorations due to flesh bruising are free of clots and limited to areas other than the breast and legs except for the area adjacent to the hook.
Source: United States Classes, Standards, and Grades for Poultry AMS 70.200 et seq. - September 5, 2002, page 22,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004377, accessed May 2015.
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The USDA AMS also provides handbooks and manuals providing instructions to assist industry
egg graders in their application of the U.S. egg grading standards. The USDA AMS Egg-
Grading Manual is a handbook which “provides graders with an understanding of egg marketing,
the purpose of grading, production and processing practices, and Federal-State grading programs.
An in-depth description of USDA’s egg grading and certification programs is provided for use
by processors, marketers, volume food buyers, and retailers to enhance their procurement and
quality control activities.”139
The USDA AMS manual entitled United States Standards, Grades,
and Weight Classes for Shell Eggs, AMS 56 is the document used in the voluntary shell egg
grading program providing a national grading service based on official U.S. standards, grades,
and weight classes for shell eggs.140
These standards are applicable only to in the shell eggs that
come from domesticated chicken hens.
There are three quality levels associated with shell eggs (Table 30). These quality designators
are AA Quality, A Quality, and B Quality (Grade B). The assignation of a grade for shell eggs is
done by “lot” (two or more eggs) rather than by individual shell egg. There are two grades
allowed under the designator U.S. Grade AA. These are U.S. Consumer Grade AA (at origin)
which refers to a lot with at least 87 percent shell eggs of AA quality and U.S. Consumer Grade
AA (at destination) which refers to a lot with at least 72 percent shell eggs of AA quality. For
the designator U.S. Grade A, there are also two grades allowed: U.S. Consumer Grade A (at
origin) – at least 87 percent A quality or better shell eggs, and U.S. Consumer Grade A (at
destination) - at least 82 percent A quality or better shell eggs. U.S. Grade B allows two
designators as well though the percent B quality at origin and at destination are the same – 90
percent. The difference between these two designators resides in the allowance for Leakers,
Dirties, or Loss (due to meat or blood spots).
139 USDA, AMS, Handbook Number 75, Egg-Grading Manual,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004502, accessed May 2015. 140 USDA, AMS, Marketing and Regulatory Programs, Poultry Programs, July 2000. United States Standards, Grades, and
Weight Classes for Shell Eggs, AMS 56, http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004376,
accessed May 2015.
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Table 30. Summary of U.S. Standards for Quality of Individual Shell Eggs
SUMMARY OF U.S. STANDARDDS FOR QUALITY OF INDIVIDUAL SHELL EGGS
Specifications for Each Quality Factor
Quality
Factor
AA Quality A Quality B Quality
Shell Clean.
Unbroken.
Practically normal.
Clean.
Unbroken.
Practically normal.
Clean to slightly stained. *
Unbroken.
Abnormal.
Air Cell 1/8 inch or less in depth.
Unlimited movement and free or
bubbly.
3/16 inch or less in depth.
Unlimited movement and free
or bubbly.
Over 3/16 inch in depth.
Unlimited movement and free
or bubbly
White Clear.
Firm.
Clear.
Reasonably firm.
Weak and watery.
Small blood and meat spots
present. **
Yolk Outline slightly defined.
Practically free from defects.
Outline fairly well defined.
Practically free from defects.
Outline plainly visible.
Enlarged and flattened.
Clearly visible germ
development but nit blood.
Other serious defects.
For eggs with dirty or broken shells, the standards of quality provide two additional qualities.
They are:
Dirty Check
Unbroken. Adhering dirt or foreign material, prominent stains,
moderate stained areas in excess of B quality.
Broken or cracked shell but membranes
intact, not leaking. ***
* Moderately stained areas permitted (1/32 of surface if localized, or 1/16 if scattered).
** If they are small (aggregating not more than 1/8 inch in diameter).
*** Leaker has broken or cracked shell membranes, and contents leaking or free to leak.
Source: United States Standards, Grades, and Weight Classes for Shell Eggs AMS 56 - July 20, 2000, page 12,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004376, accessed May 2015.
The above referenced manuals and handbooks are incorporated into this report by reference as
Attachments I to IV.
FSIS is the governmental agency charged with “ensuring that the nation’s commercial supply of
meat, poultry, and egg products is safe, wholesome, and correctly labeled and packaged.”141
As
noted earlier, the poultry inspection and grading program is a voluntary program. Under the
FSIS umbrella “Establishments have the option to apply for Federal or State inspection. States
operate under a cooperative agreement with FSIS. States’ program must enforce requirements
“at least equal to” those imposed under the Federal Meat and Poultry Products Inspection Acts
and the Humane Methods of Slaughter Act of 1978. However, products produced under State
141
USDA, FSIS, About FSIS, http://www.fsis.usda.gov/wps/portal/informational/aboutfsis, accessed May 2015.
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Inspection are limited to those marketed within the state, unless a state opts into an additional
cooperative program, the Cooperative Interstate Shipment Program.”142
Data
The Census reports inventory and sales of 14 species of domesticated fowl and commercial
game-birds as well as poultry from other species under the category “other poultry.”143
More
poultry industry data, including estimates derived by NASS from surveys, are available for the
larger sectors of the industry; chickens (including eggs), ducks, and turkeys. Production data on
the other sectors of the poultry industry are geographically limited, sporadic, and in many cases
anecdotal. The NASS survey-based estimates include condemnation data for chickens, ducks,
turkeys, and other poultry (as an aggregate). These condemnations are documented for
airsacculitis, leukosis, synovitis, tuberculosis, tumors, contamination, and a variety of generic
physical (e.g., bruising) and processing (e.g., over scalding) problems. APHIS maintains data on
“reportable” animal diseases. Currently reportable diseases include HPAI, low pathogenic avian
influenza (H5 or H7 subtypes). Newcastle disease, turkey rhinotracheitis, infectious bronchitis,
infectious laryngotracheitis, duck viral hepatitis, fowl cholera (Pasteurella multocida), fowl
typhoid (Salmonella gallinarum), infectious bursal disease (Gumboro disease), Marek’s Disease,
mycoplasmosis (both M. gallisepticum and M. synoviae), chlamydiosis (psittacosis and
ornithosis, Chlamydia psittaci), and Pullorum disease (Salmonella pullorum).144
To encourage
compliance with reporting requirements, APHIS considers its data proprietary. APHIS is in the
process of revising its list of reportable diseases; changes for poultry disease reporting may
reduce the number of diseases for which data are collected.145
Two commercial services provide price data on poultry for a fee. These are Urner Berry, with a
website at http://www.urnerbarry.com/, and Watt Poultry, a division of Watt Global Media,
whose website is http://www.wattagnet.com/Poultry.aspx. Urner Berry publishes market news
and quotations on poultry and eggs in print and digital media. Urner Berry’s published reports
include Daily Poultry and Egg, West Coast Egg, and Poultry and Egg Monthly Price Review.
Watt Global Media publishes the monthly digital report Watt Poultry USA
(http://www.wattpoultryusa-digital.com/). Watt publishes data on broilers, eggs, and turkey.
The reports on wholesale and retail pricing are used by the industry in financial planning.
However, it should be noted the impact of integration makes it challenging to extrapolate farm-
gate prices from these data. APHIS has determined the net present value for commercial birds
which have been “taken” as a part of a disease management program. These determinations have
142 USDA, FSIS, Inspection, 2014, http://www.fsis.usda.gov/wps/portal/fsis/topics/food-safety-education/get-answers/food-
safety-fact-sheets/production-and-inspection/inspection-and-grading-of-meat-and-poultry-what-are-the-
differences_/!ut/p/a1/jZFRT4MwFIV_iw88lhaZy-bbQmIEHWQhKuNl6eC2kEBL2iLBX2_BB7Nl07Uvved-
J_fmFOc4w7mgnzWnppaCNlOdLw9kR5beOiBRsvaeSBi_75KXICCr9MEC-z-A2L_Rf-VsyH_-
6IYB92obbDnOO2oqVAsmccbBICr0AErjjElZIk0ZmBExWhikKwBjG52SZV9MUVi4tFbdwVzi7Pc9t7iiZS04kgy1QM2sdb
JvjBrRUE2CAmQqQGXNGCgQBegD_sD56frEszeM_XTxHMU-SRbnwIV8f4DrAdqEeCOP82fuN-
Lor2wUCqYtlNsrK1fGdPrRIQ4ZhsHlUvIG3EK2DrlkqaQ2ODslcde-ZV-vG5aGKD-
Ow903J8z7sA!!/?1dmy¤t=true&urile=wcm%3apath%3a%2Ffsis-
content%2Finternet%2Fmain%2Ftopics%2Finspection%2Fstate-inspection-programs%2Fsip, accessed May 2015. 143 USDA, NASS, 2014, 2012 Census of Agriculture, Tables 32, page 25, and Table 19 and 20, pages 377ff.
http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf, accessed April 2015. 144 USDA APHIS, 2011, 2011 National Animal Health Reporting System Reportable Disease List,
http://www.aphis.usda.gov/animal_health/nahrs/downloads/2011_nahrs_dz_list.pdf, accessed April 2015. 145 USDA APHIS, 2014, Proposal for a U.S. National List of Reportable Animal Diseases (NLRAD) Concept Paper,
http://www.aphis.usda.gov/animal_health/downloads/nlrad_concept_paper.pdf, accessed April 2015.
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included appraisal values for over 250 species/breeds of fowl including game birds. The APHIS
values are generally calculated based on the price of day-old birds offered by mail order
hatcheries and an estimated cost of feeding them to the age of the depopulation. APHIS
considers market pricing for marketable birds, the net present value of future production of table
and fertile eggs, and the value of the intellectual property rights in breeding stock, when
appropriate.
Stakeholder Input
Over the course of six on-site listening sessions, and four telephone listening sessions, the
Contractor gathered feedback from more than 100 stakeholders. Some of the stakeholders from
the listening sessions followed up with individual conversations in person or by telephone or
with email correspondence. In addition, the Contractor had telephone calls and email
correspondence with stakeholders who had not participated in the listening sessions.
While there were several common themes in the stakeholder feedback nationwide, the feedback
was regionally disparate. Representatives from major integrators, the owners of a majority of the
birds producing meat and eggs, indicated they had no interest in catastrophic disease insurance.
They noted their geographic diversity is their major risk management tool. Furthermore, some
noted that market changes resulting from catastrophic disease outbreaks can have positive
economic effects on large firms. Widespread disease outbreaks have the potential to increase
their profits as prices rise. Even when diseases affect their own production, the size of the larger
integrators limits the potential “catastrophic” impact. However, this attitude is not reflected by
the contract growers. These growers frequently have heavily leveraged operations and a disease
outbreak that makes them miss even a single production cycle can send them into bankruptcy.
In the South, much of the grower and poultry producer concern was tied to the potential for
business interruption following a catastrophic disease event. In the central and north Atlantic
region, concerns focused on the implementation of federal catastrophic disease regulatory
programs and increasing the cost of operations resulting from these regulatory changes. In the
Midwest and West, stakeholders indicated that growers frequently have production contracts that
provide some ownership interest. This pattern was especially evident in comments from turkey
grower/owners in the Midwest and egg producers in the Midwest and West. Nonetheless,
repeated requests for copies of such contracts to document these ownership interests met with
limited success. Once again, business interruption due to down-time was a major concern of
growers and producers.
While a substantial majority (approximately 65 percent) of attendees who spoke expressed
concerns related to diseases, many growers expressed the opinion that most of this risk could be
controlled by proper biosecurity. It is important to note, many of the egg farms depopulated in
Iowa and Minnesota because of an HPAI infection maintained exemplary biosecurity practices
and standards. A majority (approximately 75 percent) of contract growers noted unpredictable
costs associated with quarantine and long layout periods following depopulation were a major
concern. Notably, in spite of the focus of the listening sessions on catastrophic disease, a
substantial number of contract growers and independent producers (approximately 20 percent)
discussed the potential for severe weather (tornado and hurricanes) to destroy houses and
facilities.
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Available Insurance
Most of those who were concerned about catastrophic risks associated with weather noted that
private coverage was already available for these perils. Furthermore, at least one stakeholder
identified private insurance offered by Catlin Group (Bermuda) and Lloyd’s (London) for
coverage for all mortality risks of livestock, including disease, on a surplus line basis. Surplus
line policies are offered in cases where state licensed insurers will not accept a risk because it
does not meet their underwriting criteria. Specially licensed brokers are allowed to offer policies
from an insurer not licensed in the state where the insurance is in force. Since these insurers are
not regulated by the state where the surplus line policy is in force, they are free from form and/or
rate regulations imposed on state licensed insurers. Surplus line policies have more flexibility in
design and prices can be set by market forces as well as the level of risk. However, following
the outbreak of HPAI, agents reported the offer of riders on catastrophic policies for disease and
for business interruption due to disease were withdrawn. No timeframe for the reintroduction of
such offers could be provided.
The Contractor considered several alternate insurance designs to address widespread disease
events in poultry including:
A disease policy addressing all losses to uncontrollable disease;
A national named peril disease coverage program;
Coverage for limited perils in limited industry sectors and regions;
Top-up coverage for APHIS payments for depopulations;
Catastrophic disease coverage with business interruption coverage; and
Whole farm coverage.
None of these approaches meets all the RMA feasibility requirements. Some of the barriers, as
are discussed in the next section. apply to all these approaches. Others present unique barriers
for just one or more approaches; these latter issues are discussed by approach herein.
Catastrophic Disease Coverage with Business Interruption Coverage
The major impediment to this approach is found in the Crop Insurance Act. There is no
provision in the act for business interruption coverage. There are some parallels between
prevented planting coverage and business interruption resulting from disease mitigation
downtime. Nonetheless, the Contractor believes substantial changes in the Crop Insurance Act
language would be required before a combined catastrophic disease business interruption policy
could be developed. For the layer sector, some parallels between tree coverage and layer sector
business interruption resulting from disease mitigation downtime were considered. Nonetheless,
the Contractor also believes substantial changes in the Crop Insurance Act language would be
required before a catastrophic disease business interruption policy focused on that sector could
be developed.
Whole Farm Revenue Protection
While a WFRP product may seem an attractive insurance option for poultry producers and
growers, there are substantial limits in the current WFRP that render it unavailable to most
interested parties. Contract poultry growers are specifically excluded from coverage (Section
44D.(1)(f)). The expected revenue from animals and animal products cannot be greater than $1
million, or more than 35 percent of the insured revenue from all commodities on the farm
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operation for the insurance year (Section 21 B. (2)). Furthermore, WFRP is not available in all
states nor in all counties in states where the product is available. These limitations currently
exclude almost every poultry operation whether integrator, grower, or producer. The Contractor
understands these restrictions were imposed to reflect the uncertainty surrounding the locations
and revenue of livestock operations. The multiple production cycles lost to a catastrophic
disease outbreak led the Contractor to conclude modifications to the WFRP product to provide
coverage for poultry catastrophic diseases are not feasible.
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SECTION IX. SUMMARY OF FEASIBILITY ASSESSMENT
The SOW requires the Contractor to “make recommendations on the 1) feasibility of new
product development; and 2) the relative feasibility of adding coverage to an existing insurance
program.”146
To address this requirement, the Contractor considered RMA’s criteria for
feasibility.147
None of the alternate insurance designs to address widespread disease events in
poultry the Contractor defined as potentially useful meets all the feasibility criteria. This
includes modification of the coverage under an existing insurance program. Each of the RMA
feasibility requirements is discussed below.
Criteria for Feasibility
The proposed insurance coverage must conform to RMA’s enabling legislation, regulations,
and procedures that cannot be changed. The Crop Insurance Act, the enabling legislation,
imposes substantial barriers for any approach to insuring poultry for losses to catastrophic
disease. A major issue is the question of insurable interest (7 U.S.C. 1520(2)). The principal
owners of meat poultry are generally the major integrators that control production from hatching
to wholesale and retail marketing of the finished product. Some owners of layers are also
integrators who contract production with growers. The integrators clearly have insurable
interest, but integrator stakeholders, particularly in the meat bird sectors, indicated limited or no
interest in an insurance approach to risk management for disease. Even after the outbreak of
HPAI, it was growers and producers who expressed interest in the insurance, not integrators.
Growers may have an insurable interest under the terms of some integrator’s contracts but that
interest must be clearly defined in both the grower’s contract and any insurance construct.
Unlike many contract growers, producers have an insurable interest in the same manner as the
producer of wheat or any other crop included under the crop insurance program.
A further barrier is the limits of coverage to crops “in the field” (7 U.S.C. 1508(a)(2)). Once the
poultry or eggs have left the “houses,” the crop clearly is beyond the “field.” Furthermore, for
the producers who have an ownership interest, the value at risk includes substantial integrated
components beyond the in-field value of the birds. This is substantially the same as the situation
confronted by crop insurance for coverage of many specialty crops. Stakeholders expressed at
least as much interest in insurance for business interruption coverage following depopulation as
for the loss of the poultry itself. The greatest concern both growers and producers expressed
concerning catastrophic disease is extended downtime. During the downtime, however, there is
no crop in a house to insure. Perhaps the argument could be made that an orchard where the
trees have been destroyed by an insurable event is like a chicken house that has been
depopulated, but the tree coverage is expressly for replacement of the trees not the opportunity
cost lost in the treeless orchard.
Finally, the Act requires any insurance to have actuarially sound rates (7 U.S.C. 1508(d)(1)).
The complexity of the poultry industry, the lack of published data on disease, and the challenge
of predicting which producers might participate make it difficult to imagine development of rates
for this insurance based on data. Any attempt to develop a premium rate must rely upon
informed judgement and the very limited data that might be accessed. To pursue a development,
146 U.S. Department of the Interior, Interior Business Center, ADQ, 2014, Order Number: D15PD00012, Section 2.4.1, page 21
of 26. 147 Ibid., pages 21 and 22.
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FCIC and the agency would have to express an unusual willingness to extend coverage based on
judgmental rate estimates and then revise those rates aggressively based on experience thereafter.
The language of the Crop Insurance Act would require appropriate treatment of growers,
integrators, and producers based on their insurable interest. The language of the Act also
requires a distinction between loss of the crop and the interruptions of business resulting from
the disease outbreak. The possibility of covering the business interruption as a “prevented
planting” event would require clarification of this concept at the regulatory level if not in the
language of the Act itself. The issue of actuarially sound rates is discussed below. Ultimately,
the Contractor believes this requirement of the Crop Insurance Act cannot logically be changed.
Actuarially sound rates are an essential construct of insurance. The public-private partnership
supporting crop insurance is based on appropriate premium rates.
The production from poultry defined as laying hens is eggs. Thus, the loss from a catastrophic
disease that killed laying hens would be the eggs not harvested. This is conceptually similar to
the loss of wheat grains not harvested from wheat plants that do not exist due to an insurable
cause of loss. The distinction between the mortality of the livestock and the loss of production
will need to be addressed appropriately so any insurance for the crop is consistent with the
limitations of the Act.
Finally, Section 523(b)(10)(C) limits expected costs of conducting livestock programs for fiscal
year 2004 and each subsequent fiscal year to $20,000,000. These funds would likely be
insufficient to support a catastrophic disease mortality program and even less likely to support a
program indemnifying losses from business interruption due to catastrophic disease because it
very likely would be difficult to demonstrate that “… all costs associated with conducting the
livestock programs (other than research and development costs covered by section 522) are not
expected to exceed…” [the specified limit].148
Furthermore, FCIC already supports livestock
programs whose costs would compete for available funds authorized under this section of the
Act. However, it is important to note the $20 million specified in Section 523(b)(10)(C) is not a
cap on outlays for any particular year. It is a guideline for expectations. The expected loss in
any year is the premium rate times the liability. So the issue about whether or not catastrophic
disease coverage fits under this limitation cannot be established until the premium rate and the
potential liability of a pilot are known. The poultry expected costs then need to be coordinated
with expected costs for the other livestock programs to determine if the limitation needs to be
modified by congressional action.
Be ratable and operable in an actuarially sound manner. Rating crop insurance ideally
requires access to substantial historical data on the frequency and severity of losses. This ideal
rarely or never is met. Catastrophic disease losses historically are relatively infrequent events.
The Contractor was unable to identify a long-term, time series database containing the necessary
frequency and severity information to construct a data driven rating model. Some poultry
diseases have never been reported in the United States; nonetheless, the globalization of the
poultry industry makes it possible that any of these diseases will affect U.S. production without
warning. The severities of the poultry losses due to catastrophic disease are influenced by
management practices (e.g., size of the house, bird population density, availability of antibiotics
148
Section 522(b)(10).
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or inoculants, etc.). The recent outbreaks of HPAI demonstrate that strict and rigid phytosanitary
measures cannot absolutely prevent the occurrence of a catastrophic disease but can deter it. The
Contractor has concluded data driven rating is not possible. The Contractor is familiar with
alternate judgmental approaches to rating. These approaches can be actuarially sound, but the
uncertainty of judgmental rating tends to result both in challenges in winning FCIC approval for
implementation and in higher conservatively-loaded premiums. This in turn affects willingness
of potential insureds to participate in the insurance.
Producers or their agents must be willing to pay the appropriate price for the insurance.
The Contractor heard repeatedly that the margins in the poultry industry are very thin.
Consequently, only producers who are extremely risk averse are likely to be willing to pay an
appropriate premium, even with subsidy, for the insurance. This is complicated by the fact that
in many cases the owners of the birds, the large integrators, have indicated they are not interested
in purchased risk management at any price. While some stakeholders have indicated a
willingness to pay an appropriate price for catastrophic disease insurance, few explored the
private commercial catastrophic disease products available before the HPAI outbreak.
Generally, the interest in a crop insurance product is focused more on business interruption
resulting from the downtime associated with catastrophic disease events and less on the loss of
production to uncontrollable disease.
There must be an appropriate geographic distribution of production to ensure a sound
financial insurance program. While the Contractor understands this feasibility requirement
applies to the RMA portfolio in its entirety, the magnitude of the poultry industry has the
potential to create pockets of substantial insured liability for disease coverage. For example,
Midwestern turkey producers, who indicated they have an insurable interest, could increase
substantially the liability insured under the RMA portfolio in that region. While the insurance
program in its entirety may still be financially sound, the distribution of insured liability is
unlikely to reflect the distribution of production in the poultry industry unless contract growers
have the opportunity to insure the poultry they are raising. Based on the past performance of the
crop insurance program, a concentration of liability is not an issue. However, disparate
distribution of production and liability present additional challenges to the establishment of rates.
Moral hazards must be avoidable or controllable. This is perhaps one of the most thought-
provoking feasibility requirements for the poultry industry. There is the potential of moral
hazard in the coordination of compensation between the APHIS depopulation program and any
proposed insurance program. These issues are manageable with appropriate language in the
policies, regulations, and procedures. Similar controls have been established to coordinate
between crop hail coverage and crop insurance. Nonetheless, to protect the poultry industry,
safeguards would need to be established so the insured could not choose a higher mortality
benefit from insurance than the depopulation benefit provided by APHIS. APHIS depopulation
is essential to the control of catastrophic diseases for the industry as a whole. The APHIS
payments are made to compensate the producer or integrator for participation in a program to
support the industry. Currently, biosecurity measures are incentivized by both the design of
APHIS compensation and the desire to produce the crop. Adding the possibility of an indemnity
into this mix has the potential to disturb the balance of the incentives. This is especially
problematic where the relationship between integrators and contract growers are contentious.
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Consequently, if there were a business interruption element of the catastrophic disease coverage,
as many growers and producers would prefer, the potential for moral hazard increases.
Furthermore, there are endemic poultry diseases that are sometimes called production diseases.
These introduce the moral hazard of the producer needing to decide between the costs of the
insurance and the costs of managing the diseases. While moral hazards are not insurmountable
barriers to development of catastrophic disease coverage for poultry, they do introduce
impediments to the development of the insurance that would need to be addressed. An insurance
structure that did not allow a contract grower the choice between a contract payment and an
insurance indemnity would be required. Such a choice might incentivize less stringent
surveillance and management of production diseases, or even outright “pyric” negligence if they
are covered causes of loss and intent in the behavior is not clearly discernable.
Customers must not be able to select insurance only when conditions are adverse. The short
production cycle for meat birds makes it easier for producers of these birds to know when
conditions are adverse. While some species grow faster than broilers (e.g., quail) and some grow
more slowly (e.g., ostrich), production cycles as short as five or six weeks for many species
would need to be addressed to avoid the possibility of adverse selection. This problem could be
addressed by requiring a relatively long period between the purchase of the insurance and the
date the insurance attaches. Alternatively, a policy that insures all flocks in a given 12-month
period could be developed. This complicates efforts to control adverse selection, especially if
growers are provided an insurable interest. Since many houses are populated on the integrator’s
schedule, a grower’s insurance might be less meaningful under this alternate approach.
Moreover, this does nothing to mitigate the concern about information asymmetries at or near the
date of an annual renewal. These are likely not insurmountable barriers; however, they cannot
be addressed until the issue of insurable interest has been resolved.
There must be enough interest for the risk to be spread over an acceptable pool of insureds. The Contractor understands this feasibility requirement also applies to the RMA portfolio in its
entirety. Considering the size of the industry, the level of interest in catastrophic disease
insurance documented by stakeholder testimony was limited. It will be less feasible to spread the
risk associated with poultry catastrophic disease across a broad pool of insureds than to spread
crop production risk collectively over such a pool. While the Contractor expects the pool of
interested producers and growers would grow and shrink as disease outbreaks occur, it is
unlikely integrator interest will increase substantially. Integrators manage the risk through
approaches other than insurance. Many integrators have staff solely responsible for risk
management.
Regarding the impact of disease outbreaks on interest in insurance, the Contractor was surprised
that participation in the listening session in California was extraordinarily limited. A notable
outbreak (in terms of value lost and number of birds affected) of AI had recently occurred in the
county where the session was held. The Contractor made substantial recruitment efforts in the
region, including working with grower organizations and local extension specialists. Yet only
one producer, but no growers or integrators, were represented at the session. While the producer
was a member of a cooperative, no follow-up calls were received from other cooperative
members, although the Contractor encouraged the participating stakeholder to solicit such calls.
This pattern changed with the outbreak of HPAI in the Midwest. Very large numbers of birds
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were lost there, with total potential production of breaking eggs reduced by as much as 30
percent. It was in this locale that the most substantial producer input was obtained. All those
expressing an interest in poultry catastrophic disease insurance had incurred some loss to HPAI.
There can be no chance of beneficial gain. From day to day, the value of a meat bird increases
and after laying begins the value of a laying bird decreases. To meet this feasibility criterion,
any poultry catastrophic disease policy would need to have a variable liability that mirrored the
value of the lost poultry. In some ways this would be similar to the dollar amount of approach
used in the existing Nursery Crop Insurance product. Without a variable value structure, there
would be the possibility of beneficial gain. A variable loss value is an unusual structure for a
mortality policy. Some field crop policies (e.g., the onion policy) are structured with indemnities
based on the stage of the crop as is the nursery crops policy. This approach could potentially be
modified for poultry. Furthermore, a method of attaching a value to birds over their life has been
implemented by APHIS. While growers and producers have expressed disappointment with the
value established by the APHIS system, it represents a useful available reference for establishing
prices that would avoid beneficial gain.
There must be no unacceptable change in market behavior or unacceptable market
distortions in terms of either a change in quantity supplied or shift in the supply curve. It is
hard to predict how an insurance product for poultry might affect the markets. Currently the
integrators and their growers are in competition with producers. Producers expressed more
interest in mortality insurance than growers, but both expressed stronger interest in business
interruption insurance to address the extended downtime needed to prepare a house in which
catastrophic disease losses occurred to accept a new “crop.” Producers are better represented in
the layer and breeder sectors and in niche markets than in the broiler and turkey sectors. These
divisions may be strong enough to limit the potential impact of insurance on supply curves.
There is a possibility that insurance might elicit a change in the integrator-grower contract terms
to reduce the risk of the integrator. Insurance might also allow some growers to consider
becoming producers. However the need for a market for the production makes this latter change
less likely since the opportunities for open market sales are limited. Essentially, a grower would
need a buyer for the production before undertaking the investment. Integrators may not be
willing to loosen the restrictions presently imposed on managing the production.
The insurance product must be effective, meaningful and reflect the actual risks of the
producers. This criterion is difficult to address because of the large number of potential
catastrophic diseases and the distribution of those diseases globally. Furthermore, since the
actual risk of greatest concern to respondents is the downtime, it is not clear potential insureds
would consider mortality insurance as effective and meaningful coverage for their operations. A
producer might be compensated for the loss of birds but still face bankruptcy because of
downtime. If enough producers are so impacted, it could have a significant effect on the
agricultural economy.
The perils affecting production must be identified and categorized as insurable and non-
insurable. During the listening sessions, producers indicated that the diseases that affect poultry
are numerous. It would be essential in the development of an insurance product that diseases be
categorized as controllable or uncontrollable, and also as production diseases (i.e., endemic and
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causing limited losses) or catastrophic diseases. Stakeholders indicated concern about a limited
number of diseases in any one area and for any one industry sector. However, as noted earlier,
concerns were not consistent regionally. Some stakeholders suggested that a very limited pilot
for a single industry sector in an isolated region might be appropriate. Gamebirds, turkeys in the
Midwest, and eggs in the Midwest or Southwest were all suggested as possible pilot projects.
While the Contractor believes these suggestions have some merit, consideration of the other
barriers to implementation is important.
Contain underwriting, rating, pricing, loss measurement, and insurance contract terms and
conditions. Terms and conditions are a matter of policy language and procedures. If the other
barriers to implementation of a poultry catastrophic disease product can be overcome, the
Contractor believes appropriate contract terms and procedures can be developed.
Impediments Specific to Approaches to Insuring Poultry Catastrophic Diseases
The principal barrier to an insurance policy addressing all losses to uncontrollable poultry
diseases is the magnitude of the disease list. Currently, production diseases cause some
variability in yield, but much less variability than is seen in field crops. Yet the impact of this
limited variability is exacerbated by the incredibly thin margins under which the growers
operate. As regulatory restrictions limit control mechanisms available for production diseases,
greater variability in “yield” can be expected. Production diseases may become catastrophic, at
least as far as survival of grower operations is concerned. Diseases endemic to wild populations,
such as AI, can be expected to have sporadic but substantial outbreaks. As live birds and poultry
products are moved across borders, new diseases will affect the U.S. flocks. The timing of the
emergence of Salmonella enteritidis as a common food-borne illness in the United States, and
the location of those early infections, corresponded with the import of chicks to replace layers
lost to a major depopulation response by the US Government associated with an AI outbreak in
the Northeast. Furthermore, for the most part the poultry diseases affect different species in
dissimilar ways. Consequently, the magnitude of a program addressing all diseases for all
poultry species is enormous. Quantifying the risk by disease and species becomes an almost
insurmountable barrier to development.
A national named-peril disease coverage program faces many of these same hurdles.
Stakeholders suggested a potential approach to development of a poultry catastrophic disease
program would be to cover only a limited number of specific diseases (the named-perils).
However, there was little agreement about the appropriate diseases for such a program, although
after the AI outbreak, AI was consistently named. Furthermore, the risks for these named perils
are likely to be very different in different parts of the country. Different rates in different regions
would likely introduce market forces that affected participation in the program and perhaps the
supply curve. Furthermore, the cost of the insurance would likely exacerbate price differences
for production in different regions that in turn could introduce unacceptable market disruption
into the poultry industry itself.
Stakeholders at several listening sessions suggested the best approach to begin development of a
poultry catastrophic disease program would be to start with just one species and one or two
diseases. However, there was little agreement about the appropriate disease and species for such
a pilot. This introduces the potential for extreme dissatisfaction with the insurance if a non-
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specified disease were to severely affect a non-specified species. Coverage for limited perils in
limited industry sectors would almost certainly introduce market factors that would not be
acceptable under RMA’s criteria for feasibility. Yet the implementation of this approach would
provide the most reliable evidence of producers’ interest.
APHIS compensation was described previously. In some limited ways this is a form of risk
management for specific poultry catastrophic diseases. A crop insurance product that provides
top-up coverage for APHIS payments might provide a mechanism for supporting producers,
growers, and even integrators during down time due to disease. APHIS also pays only for live
birds at the time a VS 1-23 form is submitted to the service. A top-up product could provide
coverage so a whole flock would be protected, not just the birds alive when the VS 1-23 was
submitted. The availability of both APHIS compensation and RMA indemnities would require
careful coordination to assure the incentives for strong biosecurity were not undermined by the
compensation available. Careful underwriting would be needed to avoid the possibility of
beneficial gain.
From the FCIC’s perspective, there are important issues regarding constraints imposed by the
Crop Insurance Act, as well as fundamental questions about contract grower’s insurable interest.
There are also important questions regarding identification, measurement, and tracking of the
value of a livestock “crop,” similar to those that have been faced by the FCIC as it has provided
coverage for the nursery industry. Moreover, the proprietary and closely guarded nature of
production data makes the prospect for development of meaningful premium rates without a
significant uncertainty load unlikely. This in turn affects both the issue of whether coverage
would be meaningful and the issue of whether potential insureds would be willing to pay the
premium. In light of these and other issues identified in this study, the Contractor believes it is
not currently feasible to develop poultry catastrophic disease crop insurance for the FCIC
portfolio without substantive changes in the crop insurance paradigm.
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Appendix A
Poultry Grower Contracts
Final Study for the Study on Poultry Catastrophic Disease
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A1
BROILER PRODUCTION AGREEMENT
This AGREEMENT, made and entered into this _________ day of __________, ______,
by and between INTEGRATOR COMPANY hereinafter referred to as “Integrator” and
_____________________________________________ of _____________________________,
Party of the Second Part, with its address for notice at _________________________________,
hereinafter referred to as “Grower.”
WITNESSETH
Additional Capital Investments Disclosure Statement:
ADDITIONAL LARGE CAPITAL INVESTMENTS MAY BE REQUIRED OF GROWER
DURING THE TERM OF THIS AGREEMENT.
Integrator expressly intends that this Agreement and the independent services of Grower
establish Grower as an independent, third party contractor grower. Grower is primarily
responsible for the care, maintenance and growth of each flock to which it has custody. Grower
shall use its own judgment and experience in finalizing all techniques and production methods,
using the Broiler “Growing Program” Procedures Guide as guidelines only and reporting its
successes and recommendations to Integrator.
In consideration of the agreements and covenants of each with the other herein contained,
said parties hereby contract and agree as follows:
I. Integrator agrees:
A. To furnish the Grower with a flock (“Flock”) of birds to raise for broiler
production for Integrator. Integrator bears the cost of and retains title to the birds [emphasis
added]. Integrator shall have the right to determine the placement density of the birds.
B. To provide and deliver to the Grower such feed, fuel, litter, medication, vaccine,
and litter amendments as may deem necessary for the care of the Flock placed in the custody of
the Grower under this Agreement. Integrator retains title to any feed, medication, or other
supplies remaining on the Grower’s farm [emphasis added].
C. To determine and schedule when and where the Flock is to be removed for
processing [emphasis added] and shall or shall arrange for third parties to catch, load and
transport the Flock at no cost to the Grower.
D. To provide the Grower all feed delivery and live poultry scale tickets that are used
in the calculation of the Grower’s compensation and furnish Grower with a copy of the final
Flock settlement instrument calculating the payment due to Grower (“Final Flock
Settlement”). Any feed picked up by or returned to Integrator shall be weighed and reported on
the Final Flock Settlement.
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E. To compensate the Grower for services rendered herein as provided for in the
attached “Grower Payment Schedule,” not later than fifteen days following the week in which
the Flock is slaughtered.
II. Grower hereby commits himself to accept delivery or placement of the Flock, and in
addition, agrees:
A. To furnish and provide, in accordance with Integrator’s judgment, the necessary
land, buildings, equipment, utilities (understanding that maintenance, management and
environmental management are always Grower’s responsibility and Integrator assumes no
responsibility as to these or other Grower responsibilities) and further, to provide such labor
(including hiring assistants, if any, as Grower may choose) as are necessary to properly care for
the Flock.
B. To be present and assist in the preparation of the house(s) for the delivery of
chicks and, also, for the removal of the Flock.
C. To adopt and follow sound poultry management practices that conform to
practices of good animal husbandry that are at least comparable to Integrator’s recommended
practices.
D. To comply with applicable State, Federal and Local environmental laws, rules,
regulations, codes and ordinances (“Laws”), including but not limited to, those governing
environmental management, poultry litter management, and prompt and proper disposal of all
litter and dead birds. Growers in the State of Oz shall be properly certified by the Oz Nutrient
Management Commission, or its successor, and shall include within their Nutrient Management
Plans or Animal Waste Management Plans (NMP/AWMP) accurate and required accounting for
nitrogen and phosphorous applications, as required by Oz’s nutrient management Laws.
E. To provide properly maintained roads, free of surface or overhead obstructions,
from the nearest county or state maintained road to and around Grower’s poultry house(s) and
furthermore, to provide adequate space to turn vehicles where necessary and adequate loading
areas for birds. Grower shall be liable for wrecker or towing charges incurred by Integrator due
to insufficiently or improperly maintained roads.
F. To allow no other poultry, fowl, wild birds, exotic or domestic pet birds on the
Grower’s premises.
G. To secure all poultry house(s) to prohibit the entrance of unauthorized persons or
wild and domestic animals and birds.
H. To insure that all hired labor or other authorized entrants to the poultry house(s)
follow proper biosecurity procedures and have no contact with other fowl, wild birds, or exotic
or domestic birds.
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I. To keep accurate records (such as daily mortality) necessary for the efficient and
proper care of the Flock.
J. To notify Integrator immediately if any situation develops that has an adverse
effect on the health or well being of the Flock (such as increased mortality or other disease or
abnormal conditions).
K. To not use or allow to be used during the period of this Agreement any feed,
medication, herbicides, pesticides, rodenticides, insecticides or any other such item except as
supplied or approved in writing by Integrator.
L. Within this framework, Grower retains the exclusive power to control how the
actual growing and care services are provided, by use of its own skills, labor, tools, ideas,
manner, and judgment [emphasis added].
M. To indemnify Integrator, its officers, employees, agents and representatives,
defend and hold Integrator harmless from and against:
1. Any and all claims for damage or injury to persons or property arising out of or
resulting from the Grower’s operations or inactions under this Agreement, except
to the extent such damage or injury is caused by the gross negligence or willful
misconduct of Integrator.
2. Loss from theft or disappearance of birds, feed, medications, or other goods
supplied by Integrator pursuant to this Agreement.
N. To indemnify, defend and hold Integrator, its officers, employees, agents and
representatives harmless from and against any and all losses, claims, damages, and actions,
including federal, state, or local administrative actions, rulings and all other actions of any nature
whatsoever which are in any manner caused by or which result from the presence of the broilers
on the premises of Grower, including, but not necessarily limited to matters involving emission
complaints; disposal complaints; pollution complaints; violation of Laws and any negligent acts
or omissions of Grower in the performance of its obligations under this Agreement.
O. To carry comprehensive general liability insurance with limits of not less than
Five Hundred Thousand Dollars ($500,000.00) for death or bodily injury and/or property damage
per occurrence. If possible without charge to Grower or Integrator, Integrator shall be named as
an additional insured. In any event, a certificate of insurance shall be delivered to Integrator
annually on or before the renewal date of the policy. All policies of insurance shall contain a
provision that the insurer will not cancel or materially change the policy, except after thirty (30)
days’ prior written notice to Integrator.
P. To notify Integrator if Grower plans to significantly change its operations.
III. It is further understood and agreed that:
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A. This is a service contract and not a contract of employment and Integrator and the
Grower are independent contractors and neither their employees nor agents shall be considered
to be employees of the other for any purpose whatsoever.
B. The Grower accepts full and exclusive liability for payment of any and all
applicable local, state and federal taxes, taxes for workers’ compensation insurance,
unemployment compensation insurance, or old age benefits or annuities now or hereafter
imposed by any governmental agency, as to Grower and all persons as Grower may engage in
the performance of this Agreement.
C. Integrator shall not be held responsible or liable for damages to Grower caused by
delay or failure to perform hereunder when such delay or failure is due to fire, labor strike, act of
God, legal act of a public authority or a labor, feed or fuel shortage, disease, or other
circumstances outside the reasonable control of Integrator.
D. Integrator shall have the right to immediately remove said birds from the
Grower’s premises at any time that any of the following events may occur:
1. The birds contract any disease that, in Integrator’s sole reasonable judgment,
renders the Flock to be unthrifty, poses a disease threat to other poultry, or as
directed by federal, state, or local authorities.
2. Grower’s management practices do not conform to Integrator’s standards and/or
do not conform to practices of good animal husbandry.
3. Failure of the Grower to comply with any provision of the Agreement.
4. Grower becomes insolvent or commits any act of bankruptcy.
5. The use of abusive language, threat of physical harm or in any manner prohibiting
Integrator or its authorized representative from properly monitoring the Flock.
6. The Flock reaches a normal marketable age as determined by Integrator.
E. If in the judgment of Integrator, the Grower should fail to provide proper care,
feeding or treatment under the terms of this Agreement, Integrator shall have the right to enter
over and into the land and premises where the Flock is located and provide necessary care for
and handling of the Flock and to charge the Grower with expenses incurred to accomplish this,
which will be deducted from settlement before final payment is made.
F. Integrator shall have the right of access at all times to the premises in which the
Flock shall be housed or otherwise located for the purpose of inspecting birds, delivering chicks,
feed or supplies and removal of birds.
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G. If a Grower’s Flock performance as determined by either the Standard Cost (as
defined in the Grower Payment Schedule) or the basic management practices of the Grower
reaches an unacceptable level as determined by Integrator, then the following may occur:
1. Consultation with Integrator’s Grow-Out Department management and placement
of Grower on an action plan or performance improvement plan.
2. Action plans will be developed in writing with a Grower.
3. Action plans precede a notice of termination that will be issued concurrently with
placing a Grower on a performance improvement plan so the Grower is advised
that if the performance improvement plan is not met that the Grower will be
terminated and the date of termination.
4. A copy of the current performance improvement plan standards are attached
hereto as Schedule I. New contracts or new Flocks may have changed terms for
performance improvement plans that will be provided to the Grower.
5. If the Grower fails to comply with the performance improvement plan to
Integrator’s satisfaction the contract will be terminated at the date specified in the
initial notice.
H. INTEGRATOR DOES NOT WARRANT QUALITY, MERCHANTABILITY,
FITNESS FOR PARTICULAR PURPOSE OR OTHERWISE WARRANT ANY PRODUCT
DELIVERED BY OR RECOMMENDED BY IT TO THE GROWER UNLESS
MANUFACTURED BY INTEGRATOR. SUCH GOODS ARE DELIVERED AS IS, WHERE
IS AND THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE HEREOF.
I. Integrator may assign this Agreement at any time. The Grower may assign this
Agreement only with the written consent of Integrator which consent may be withheld in
Integrator’s sole discretion.
J. TERMINATION PROVISIONS:
As a matter of convenience of not having to initiate a new contract for each Flock, this
Agreement shall be continuous until terminated as follows:
Grower shall have a right to rescind this Agreement until 11:59 p.m. on the third business
day after the day on which Grower signs the Agreement. Grower shall provide written notice of
termination to the Integrator’s Live Production Manager or Breeder Manager.
Grower may cancel this Agreement without cause and either party may cancel this
Agreement with cause, but in all cases, upon first giving the other party written notice of such
decision to terminate: provided, however, that such written notice on the part of the Grower or
Integrator shall be given no less than ninety (90) days prior to the termination date. Any such
notice of termination shall be personally delivered or sent by first class mail to the other party at
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the address set forth below such party’s signature line. The notice may be given at the date the
party enters the performance improvement plan program if that program applies to the Grower.
In any event, Integrator’s termination notice shall specify the reasons and any appeal rights. The
effective date of the termination shall be stated by the party giving notice.
Neither party shall incur any liability to the other party as a result of so electing to
terminate this Agreement. Any claim that either party may have against the other party for sums
loaned or indebtedness owed to the other party or for breach of this Agreement shall survive
termination of this Agreement.
Termination during a Flock placement shall be in accordance with the other terms of this
Agreement. Should such termination occur, Integrator agrees to pay the Grower for all services
performed until termination of this Agreement, and the Grower agrees to perform all obligations
until termination of this Agreement. Except for cause or economic necessity, such as Grower’s
gross negligence, Flock abandonment or material financial breach, hereinafter defined,
Integrator will not terminate this Agreement without first providing Grower an opportunity to
cure any deficiencies through a performance improvement plan or other written agreement
reached by the parties.
Notwithstanding any provision in this Agreement to the contrary, in the event of
Grower’s gross negligence or Flock abandonment, Integrator shall have the right to remove the
Flock and/or take over said work and complete it in any manner it sees fit, with any and all
expenses incurred by Integrator being charged back to the Grower, and at Integrator’s option this
Agreement, at that time, may be terminated without notice.
Notwithstanding any provision in this Agreement to the contrary, Grower’s default under
any financing agreement and/or levy, seizure, or attachment of Integrator or Grower’s property,
Grower insolvency or bankruptcy, shall be considered a “material financial breach” of this
Agreement and/or its Exhibits, and Integrator shall have the right to take over said work and
complete it in any manner it sees fit, with any and all expenses incurred by Integrator being
charged back to the Grower, and at Integrator’s option this Agreement, at that time, may be
terminated without notice.
IV. Miscellaneous:
A. This Agreement shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto, and shall supersede any previous agreements made
between the said parties.
B. Further, this Agreement constitutes the sole and final agreement between the
parties hereto and may be changed or modified only by an agreement in writing signed by each
of the said parties.
C. The terms of this Agreement and any documents provided in conjunction
herewith or pursuant hereto, including, but not limited to, any Final Flock Settlement and
Grower Payment Schedule, shall be deemed confidential information and trade secrets and may
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only be shared by Grower if or with: (i) required by applicable legal standards or processes to a
federal or state governmental agency; (ii) provided to financial or legal advisers or lenders; (iii)
Grower’s hired accounting services representative; (iv) if Grower is an entity, Grower’s
executives or managers that agree in writing to maintain the confidential nature of the
information; (v) Grower’s landlords that agree in writing to maintain the confidential nature of
the information; (vi) a member of Grower’s immediate family or a business associate with whom
the Grower has a valid business reason for consulting; or (vii) other Integrator. All such
produced documents shall be marked COMPANY CONFIDENTIAL on each page. In addition,
the Grower shall immediately provide to Integrator notice of any such legal requirement.
Confidential information shall not include information which becomes generally available to the
public other than as a result of any unauthorized disclosure by Grower. Grower agrees on behalf
of it and its officers, directors, employees, agents and representatives, if any, not to disclose to
any third party or appropriate for their own use any confidential information. Each party to
whom or to which confidential information is shared will be asked to maintain the confidential
nature of the information.
D. This Agreement shall be governed and interpreted by the laws of the State where
Grower’s operations under this Agreement are conducted.
E. As noted above, this Agreement may be canceled by Grower within three (3)
business days after it is executed by Grower by delivery of a cancellation notice from Grower at
the address referenced in the opening paragraph hereof.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day and year first
above written.
_________________________________ INTEGRATOR
Grower
_________________________________ By:
Social Security # or Federal ID #
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SCHEDULE I
Criteria for placing Grower on PIP (Performance Improvement Plan):
1. Written action plan required:
When a grower’s six Flock average reaches (-) minus $.0040 or worse.
The plan will be written in cooperation with the Grower and it will define steps
the Grower should take to improve performance.
2. PIP required:
When a grower’s six Flock average reaches (-) minus $.0065 or worse.
The Grower will be sent a certified letter notifying them that they are on the PIP
and providing notice of termination if the PIP plan does not result in improved
performance.
The certified letter will be sent prior to the placement of the Flock on the PIP.
The certified letter will inform the Grower that any Flock while on the PIP must
settle better than (-) minus $.0030 or the contract with the Grower will be
terminated.
If the termination Flock settles in less than ninety (90) days from the notification
by certified letter, the Grower may place another Flock in order to meet the ninety
(90) day notification.
If a grower’s six Flock average improves to better than (-) minus $.0065 and does
not have any Flocks worse than (-) minus $.0030 while on the PIP, the Grower
will be removed from the PIP program.
In the case of "Force Majeure" meaning war, hostilities (whether declared or
not), disasters, including as to individual farms, unforeseen natural catastrophe
including but not limited to earthquake, flood, fire, and other causes beyond
Grower’s foreseeable control, such as labor strike, legal act of a public authority
or a labor, feed or fuel shortage, then the PIP and notice of termination may be
extended, in writing.
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Schedule II
INTEGRATOR
ADDENDUM TO BROILER PRODUCTION AGREEMENT
MINIMUM PAYMENTS FOR NEW HOUSE CONSTRUCTION
This ADDENDUM, made and entered into this _____________ day of
_______________, by and between INTEGRATOR., referred to as “Integrator” and
___________________________________________________ of
_________________________________________, Party of the Second Part, hereinafter referred
to as “Grower”.
The Broiler Production Agreement (Grower Payment Schedule) is hereby amended as
follows:
I Integrator agrees to pay the Grower for each flock of poultry placed in the
Grower’s care a guaranteed minimum payment for new house construction according to the
following schedule:
House Dollar ($) Amount
Class Type Per 1,000 Birds Placed* Age of House – Period of Payment
Large
AAA Tunnel With $300 15 Year Term
Self Generation, (Built after 12-31-02)
Darkout With
Dimmers,
6” Recirculating
Pad, Approved
Air Speed,
Radiant Heat in
Brood Chamber
AA** Tunnel With $245 15 Year Term
Controller, Self
Generation, (Built after 08-19-02)
Dimmers, 6”
Recirculating Pad,
Approved Air Speed
A Tunnel With $230 15 Year Term
Controller and
Dark-out
* Based on a placement density of one bird per .75 square foot of floor space.
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II All house types must be constructed and equipped according to Integrator’s
requirements and specifications.
III Disaster Payment:
a. A disastrous loss will be determined by Integrator and is the result of
fire, windstorm, flood, or disease [emphasis added], not resulting from any
negligent act or omission on the part of the Grower.
b. In the event of a 100% disastrous loss of birds, Integrator will compensate
the Grower $15.00 per 1,000 birds started for each week the birds are in the
Grower’s house until the date of the disaster.
c. In the event of a partial disastrous loss (less than 100% of the birds are lost),
Integrator will compensate the Grower $15.00 per 1,000 birds lost for each week
the birds are in the Grower’s house based on the number of birds lost. The above
payment schedule will be used to calculate the payment for the surviving birds
with the exception that if any minimum payments apply, they will be paid on
number of birds moved rather than number of birds started.
IV In the event there is an excessive amount of birds lost (greater than 4% of the birds
housed) during a 24-hour period that is the result of the following event:
1. Birds are lost due to malfunction of the Grower’s equipment (alarms, fans,
curtain minders, generators, electrical boxes, etc.) that was preventable and within the
control of the Grower,
Or
2. Birds are lost due to a caretaker not being present to respond to an emergency
situation,
Then
all Minimum Payments, Disaster Payments, and New House Construction Minimum
payments will not apply.
3. Birds are lost due to malfunction of the Grower’s equipment (alarms, fans,
curtain minders, generators, electrical boxes, etc.) that was not preventable and not within
the control of the Grower, then all Minimum Payments, Disaster Payments, and New
House Construction Minimum Payments will apply to the number of birds moved (Live
Haul count).
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IN WITNESS WHEREOF, the parties have hereunto set their hands the day and year first
above written.
_________________________________ INTEGRATOR
Grower
_________________________________ By: __________________________
Date
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Poultry House # Class Date Built ______ ________ _________________________
______ ________ _________________________
______ ________ _________________________
______ ________ _________________________
______ ________ _________________________
______ ________ _________________________
GROWER PAYMENT SCHEDULE
A. Base Payment Rate: $.0450 per pound of poultry moved.
B. Feed Conversion Performance Rating:
Will be determined by comparing each Grower’s average weight per bird and
feed conversion to the Weekly Average Weight / Feed Conversion of all flocks in
the settlement week.
The average weight will be adjusted using a ratio of .10 points of weight equal to
.01 point of feed conversion.
Average weight will be determined by dividing the pounds of poultry moved
from the Grower’s farm by the number of birds at movement as determined from
the House Mortality Chart. The grower is required to keep an accurate record of
flock mortality.
Example Weekly Average Grower #1 Grower #2 Grower #3
Avg. Weight 6.50 6.60 6.40 6.60 Avg. Feed Conversion 2.05 2.04 2.06 2.06 Rating .00 +.02 -.02 .00
The rating is then multiplied by $.0750 to determine the cents per pound
adjustment to the Base Payment Rate.
Example +.02 x $.0750 = + $.0015/ lb. Added to the Base Payment Rate
-.02 x $.0750 = - $.0015/ lb. Deducted from the Base Payment Rate
C. Fuel Performance Rating:
Will be determined by comparing each Grower’s fuel cost per pound to the
Weekly Average Fuel Cost per pound of all flocks in the settlement week.
An average unit cost of fuel for the settlement week will be calculated and will be
applied to each Grower’s actual units used during the flock.
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Example
Grower
Actual
Gal. Used
Total*
Fuel $’s
Fuel Cost**
/ Pound
Avg. Wkly
Fuel Cost
Base Pay
Adjustment
#1 73 $58 $.0005 $.0010 =$.0005
#2 216 $173 $.0015 $.0010 -$.0005
* Average Weekly Fuel Cost/Gal. = $.80
** Pounds Moved = 115,000
D. Standard Cost:
Defined as the cost of feed (using a fixed ingredient cost/ton) plus fuel (using the
weekly average cost/gal.) calculated on a per pound of poultry moved.
A minimum of ten flocks per growing program is required to calculate the
Weekly Average Standard Cost. If less than 10 flocks are moved during the
week, the Weekly Average Standard Cost for the previous week will be used for
each flock until the 10 flock minimum requirement is obtained.
Any flock with a Standard Cost that is either $.0150 per pound greater than (+) or
less than (-) the Weekly Average Standard Cost will not be included when
computing the final Weekly Average Standard Cost.
E. Top Six Growers Bonus Payment:
A bonus payment per pound for each growing program will be added to the Base
Payment for the top six Growers that have the lowest Standard Cost for the
week’s settlement period.
The following per pound payment will be added to the Base Payment:
#1 Grower: $.0050 #4 Grower: $.0020
#2 Grower: $.0040 #5 Grower: $.0010
#3 Grower: $.0030 #6 Grower: $.0005
F. Tunnel Premium Payment
Tunnel ventilated houses that are approved by Integrator will receive an
additional payment per pound of $.0010.
This “Tunnel Premium Payment” will be added to the Base Payment per
pound.
If a farm has a combination of “tunnel” housing and “conventional” housing
on the same account, the premium pay per pound will be pro-rated based on
percent of capacity placed in each style house.
Example: 3-house farm --- 2 tunnel houses had 49,000 chicks placed and 1
conventional had 21,000 chicks placed.
49,000 tunnel capacity divided by 70,000 total capacity = 70% tunnel
housing
70% x $.0010 = $.0007 per pound of poultry moved.
G. Insulated Sidewall Incentive Payment
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Houses with at least one sidewall that is closed in, insulated to minimum R-8 and
sealed properly to Integrator approval will receive an additional payment per
pound of $.0005.
This “Insulated Sidewall Incentive Payment” will be added to the Base Payment
per pound.
If a farm has a combination of solid sidewall and open sidewall housing, then
“Insulated Sidewall Incentive Payment” will be pro-rated based on the percent of
capacity placed in each style house. (See tunnel pro-rate formula in Section F.)
H. Performance Payment
Growers who have a previous Six-Flock Average that is better than average will
have 50% of their previous Six-Flock Average added to their base payment.
Six-Flock Average is defined as the simple average of the Grower’s most recent
six flocks’ Standard Cost. A grower with less than six flocks, but more than three
flocks, will have a partial flock average of those flocks. A Grower with three
flocks or less will be assigned the average six flock (i.e., zero).
Example: Growers previous Six-Flock Average is +.0020 than .0010 will be
added to their base payment.
I. Minimum Payment:
A minimum payment per 1,000 birds started (at .75 density) is based upon a
Grower’s Six-Flock Average as follows:
Six Flock Average Minimum Payment
+$.0026 or above $160.00 per 1,000 birds
+$.0011 to + $.0025 $155.00 per 1,000 birds
+$.0010 or below $150.00 per 1,000 birds
J. Growers who install, maintain and continuously operate the following equipment to
Integrator’s specifications will be paid an additional payment based on the square footage
of the house(s) so equipped.
1. Equipment required:
a. Six (6) inch pad with recirculating water system.
b. Tunnel ventilation with a calculated wind speed of 600 feet per minute or 100
feet per minute more than the length of the house; whichever is greater. (400
foot or less houses must have a minimum of 500 feet per minute.)
c. Controllers
d. Dark out sidewalls with light dimmers.
e. Cross-over fogger lines inside house to specifications.
f. Generator with automatic switch-on capable of operating all poultry houses.
2. Payment per square footage of house per flock produced: $.0100
3. The Minimum Payment referenced in Item H above will be $165.00 per 1,000
birds placed (at .75 density).
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K. Disaster Payment:
A disastrous loss will be determined by Integrator and is the result of fire,
windstorm, flood, or disease, not resulting from any negligent act or
omission on the part of the Grower.
In the event of a 100% disastrous loss of birds, Integrator will compensate
the Grower at the rate of $15.00 per 1,000 birds started for each week the
birds are in the Grower’s house until the date of the disaster.
In the event of a partial disastrous loss (less than 100% of the birds are lost),
Integrator will compensate the Grower at the rate of $15.00 per 1,000 birds
lost for each week the birds are in the Grower’s house based on the number
of birds lost. The above payment schedule will be used to calculate the
payment for the surviving birds with the exception that if any minimum
payments apply; the calculation will be based upon the number of birds
moved rather than number of birds started [emphasis added].
L. In the event there is an excessive amount of birds lost (greater than 4% of the birds housed)
during a 24-hour period that is the result of the following event:
1. Birds are lost due to malfunction of the Grower’s equipment (alarms, fans,
curtain minders, generators, electrical boxes, etc.) that was preventable and
within the control of the Grower,
Or
2. Birds are lost due to a caretaker not being present to respond to an emergency
situation,
Then all Minimum Payments, Disaster Payments, and New House Construction
Minimum Payments will not apply.
3. Birds are lost due to malfunction of the Grower’s equipment (alarms, fans,
curtain minders, generators, electrical boxes, etc.) that was not preventable and
not within the control of the Grower, then all Minimum Payments, Disaster
Payments, and New House Construction Minimum Payments will apply to the
number of birds moved (Live Haul count).
M. Any additional bedding deemed necessary by Integrator, because of Grower’s
mismanagement or omissions, will be supplied by Integrator at Grower’s expense, as
determined by Integrator based on standard use and practices. Grower remains
responsible for handling bedding in accordance with all Laws as defined in the Broiler
Production Agreement.
N. All flocks moved each week from Saturday midnight through the following Saturday
midnight constitute a payment period.
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O. Payment to the Grower will be made within fifteen (15) days of the date of the final
movement of the flock from the farm. Any Federal or state holiday shall extend this time
period accordingly.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day and year first above
written.
_________________________________ INTEGRATOR
Grower
_________________________________ By: __________________________
Date
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INTEGRATOR’S
POULTRY GROWER AGREEMENT AND COMPENSATION SCHEDULE
This AGREEMENT, made this day _______________________, by and between
_____________, ___________, a Delaware corporation with an address of
______________________, hereinafter referred to as _________________, _______________,
and __________________________________________________________________of
______________________________________________ hereafter referred to as GROWER.
In consideration of the premises and the mutual agreements of each other herein contained, said
parties hereby contract and agree as follows:
WISTNESSETH
Additional Capital Investments Disclosure Statement:
Additional Large capital investments may be requires of GROWER during the term of this
AGREEMENT.
I. ___________, AGREES:
A. To cosign and deliver chicks to GROWER to be raised exclusively for __________,
____________, ______________ has the right to determine placement density.
B. To provide and deliver to GROWER, or arrange to have provided and delivered to
GROWER, all feed, medication, vaccines, fuel and other flock supplies. _____________,
_________________ retain titles to any flock supplies remaining on GROWER’S farm.
C. To provide GROWER with an accounting of chicks consigned and supplies provided
under the terms of this Agreement.
D. To determine, at tis sole option and discretion, the time each flock will be delivered to
GROWER, removed from GROWER for processing and which processing plant will be
utilized and shall arrange for the catching and hauling of the flock at no cost to the
GROWER.
E. To compensate the GROWER in accordance with the terms set forth in the attached
compensation schedule.
II. GROWER AGREES:
A. To accept the chicks when cosigned by _________________, ____________ and to raise
the chicks until removed at _____________________, ___________ sole direction form
the GROWER’S farm.
B. To furnish the necessary housing, equipment, supplies to maintain equipment and
housing, utilities, alarms, labor and management to properly care for the flock in
accordance with _______, _______ requirements, which Grower agrees may change
from time to time.
C. To be present or represented when chicks are delivered and during the catching and
movement of each flock by _______, _______ and be responsible for proper house
preparation to include to chick delivery/placement and chicken catching and movement,
such preparation to include adequately raising or moving of equipment.
D. To use only the feed, medication, vaccines, fuel and other flock supplies, which
________, ________ has provided or has arranged to be provided to the GROWER for
the raising of the chicks cosigned.
E. To use only pesticides, rodenticides, or insecticides supplied or approved in writing by
__________.
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F. To allow no other poultry, fowl. Wild birds, exotic or domestic pet birds on the
GROWER’S premises and to promptly rid the farm of any birds left on the farms same
day of the final movement of birds.
G. To keep accurate records of mortality and other information for the efficient and proper
care of cosigned chicks.
H. To adhere to the National Chicken Animal Welfare Guidelines implemented on April 5,
2005 (which are adopted and incorporated herein) and any revisions of said Guidelines.
J. To assure that no birds are sold or removed from the GROWER’S premises except by
________, __________ or with its prior written consent.
K. To provided properly maintained roads, free of surface or overhead obstructions, from the
nearest country or state maintained road to and around GROWER’S poultry house(s) and
furthermore, to provide adequate space to turn vehicles where necessary and adequate
loading for birds. GROWER shall be responsible for all costs incurred by ________,
________ if roads are not maintained properly or free from obstructions.
L. To insure that all hired labor or other authorized entrants to the poultry house(s) follow
all bio-security procedures and have no contact with other fowl, wild birds, or exotic or
domestic birds.
M. To properly secure all poultry house(s) to prohibit the entrance of unauthorized persons
or wild and domestic animals and birds.
N. To follow, adhere, perform and maintain all bio-security procedures and programs
recommended by ________, _______ at all times.
O. To provide for prompt and proper disposal of all dead and cull poultry resulting from
normal moralities and/or catastrophic loss in a manner meeting the requirements of
federal, state, and local laws, regulations and codes.
P. To comply with all applicable federal, state and local laws, regulations, rules or codes
applicable to GROWER, the services provided, the chicks consigned, and/or the
properly or equipment utilized in the performance of this AGREEMENT.
Q. To comply with all applicable federal, state, and local laws, regulations, rules or codes
applicable to GROWER’S environmental management, including, without limitation,
nutrient management plans, operating permits, birds mortality, waste, disposal, water
quality and air quality.
R. To indemnify _________, ________, its officers, employees, agents and representative
and hold them harmless from and against:
i. Any and all claims for damage or injury to persons or property arising out if
resulting from the GROWER’S operations, acts or inactions under this
AGREEMENT, except to the extent such damage or injury is caused by the gross
negligence or willful misconduct of _________, __________.
ii. Loss from theft or disappearance of birds, feed, medications, or other flock
consigned herein. GROWER shall use their own judgment, skills labor, tools
ideas and experience in caring for each flock.
III. IT IS FURTHER UNDERSTOOD AND AGREED THAT:
A. The GROWER is and shall in all circumstances remain and independent contractor and
shall not be an agent, servant, or employee of, or a joint venture with _________,
_________. Each party hereto shall employ and supervise exclusively its own servants,
agents, and employees. The GROWER shall be solely responsible for the performance of
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its obligation under this AGREEMENT, and all costs incurred by the GROWER in the
performance of its obligations hereunder are the GROWER’S exclusive any debts,
liabilities or other obligations in the name of __________, _________.
B. GROWER represents and warrants that Grower is the owner of the land, buildings, and
equipment utilized for this AGREEMENT or GROWER is in legal possession of said
real property, buildings and equipment and has the right and authority to use the same for
the purposes of this AGREEMENT.
C. GROWER or their agene/designee, shall have the right to be present at the weight by
________, __________ of any birds raised by GROWER under this AGREEMENT, be
present at the weighing of feed delivered under this AGREEMENT, and observe the
weights and measures used by _________, _________ to determine the compensation
due to PRODUCER under this AGREEMENT.
D. GROWER shall be solely responsible for payment of any and all applicable federal and
state taxes on the GROWER’S income and the timely reporting and payment of all
worker’s compensation insurance, unemployment compensation, withholding and payroll
taxes, licenses, permits, and assessments now or hereafter imposed by any governmental
agency as to the GROWER and all persons employed or engaged by the GROWER in the
performance of this AGREEMENT. GROWER and all persons employed or engaged by
the GROWER in the performance of this AGREEMENT. GROWER agrees to defend
and hold __________, _________ harmless from any liability with respect to any such
taxes or other charges and reimburse, ___________, ________ for any and all costs
incurred, including attorney’s fees, in any such action.
E. All poultry and supplies furnished by _________, _________ necessary to raise the birds
pursuant to this AGREEMENT are the property of __________, __________ and the
GROWER shall have no titles or right of any kind therein. ___________, _________, at
its sole option discretion, may post notices or placards concerning its ownership at the
GROWER’S premises and may file one or more financing statements or similar
instruments under the UCC or other applicable law (for purposes of which this
AGREEMENT shall constitute a financing agreement), and the GROWER shall
cooperate fully with __________, ________ as necessary to accomplished the foregoing.
The failure by __________, _________ to provide notice of its ownership in the
foregoing manner shall not, however, relieve the GROWER of its obligation to advise
third parties of ___________, __________ ownership as provided in this AGREEMENT.
F. Grower shall permit and allow any agent, or employee of ___________, ____________
unrestricted access and entry upon the premises of the GROWER where the flock is or
shall be located, at any and all times deemed necessary by _______, ________, to inspect
the premises and the flock, to treat for disease, to cull or remove birds for any reasons, to
inspect the GROWER’S records, or take any other action ________, ________ deems
necessary in its sole discretion to protect its property.
G. If in the judgment of _________, _______ the GROWER should fail to provide proper
care, feeding or treatment under the terms of this AGREEMENT, ________, _______
shall have the rights to immediately enter over and into the land and premises where the
flock is located and provide necessary care for and handling of the flock. GROWER shall
assume the costs for any necessary disbursements to accomplish such purposes. Costs
incurred by the GROWER will deduct from settlement before final payment is made.
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H. Unless otherwise expressed in the AGREEMENT, _________, _______ GROWER shall
not be held responsible for damages to the other caused by delay or failure to perform
hereunder when such delay or failure is due to fires, strikes, acts of God, legal acts of
public authorities or delays or defaults due to labor, feed, or fuel shortages, which are due
to natural disaster (including, but not limited to, fire, flood, windstorm. or hailstorm)
which cannot be reasonable forecasted or protected against.
IV. TERMINATION:
A. For the convenience of not having to initiate a new AGREEMENT for each flock, this
AGREEMNT shall continue until the AGREEEMENT is terminated by either _______,
______ or GROWER as provided herein.
B. GROWER shall have a right to cancel this AGREEMENT until 12:00 midnight of the
third business day after the day on which GROWER signs this AGREEMENT or until
chicks have been placed with GROWER, whichever occurs first. GROWER shall provide
a written notice of termination to _______, _________ for termination to be effective.
C. This AGREEMENT can be terminated by either party upon giving the other party ninety
(90) days written notice. Notice is required to be sent by certified mailed to the address
listed the AGREEMENT.
D. ________, may not place birds with GROWER during the 90 day notification period
under the following conditions:
i. The GROWER fails to properly care for any poultry in accordance with terms of
this AGREEMENT.
ii. The GROWER permits to be levied upon or attached, or disposes or attempts to
dispose of any poultry or supplies furnished by ________, ________.
iii. The GROWER breaches any of the terms of this AGREEMENT.
iv. In the opinion of _________, _______ the flock becomes endangered for any
reason.
v. Grower’s management practices do not conform to ___________, _________
standards or do not comply with practices of good animal husbandry.
E. If this AGREEMENT is terminated by_________, pursuant to the provisions of the
preceding paragraphs then, in addition to, and not in limitations of, any other rights and
remedies available to __________, ________ at law or in equity, it or its authorized
representative shall be fully authorized to come upon the GROWER’S premises without
legal process, as ___________, __________ may elect, either to feed and care for the
flock on the GROWER’S premises or to take immediate possession and to remove or
dispose of same in such manner as ________, _____ may see fit. If _________,
________ elects to keep the flock on the GROWER’S premises and equipment for
completing the growing operation shall be without charge. If _______, ______ exercises
its rights pursuant to this paragraph, the GROWER shall be liable for any expenses and
other costs, including reasonable attorney’s fees and court costs, incurred by ________,
_________.
F. Neither party shall incur any liability to the other party as a result of so electing to
terminate this AGREEMENT. Any claim that either party may have against the other
pater for sums loaned or indebtedness owed to the other party or for breach of this
AGREEMENT shall survive termination of this AGREEMENT.
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V. PERFORMANCE IMPROVEMENT PLAN (PIP):
A. A PIP will be developed for the improvement of the overall cost and or performance of
the GROWER. A GROWER may be placed into a PIP program if one or more of the
following conditions exist:
i. A GROWER’S five of six flock average cost equals or exceeds $0.0075 per
pound worse the average of their growing program.
ii. GROWER has two consecutive flocks with costs greater than $0.0075 worse than
average of their growing program.
iii. A single event due to GROWER negligence (such as a suffocation) causing
increased mortality during a normal production cycle.
B. Once the GROWER is placed into the PIP program, the following steps will transpire:
i. An overview of the GROWER’S facility to include the condition of all
equipment, GROWER’S management technique, etc., by a committee that will
consist of the GROWER, the Technical Supervisor, and the Growout Manager.
ii. An action plan will be developed based upon the findings of the committee for
improving the overall performance and cost. The action plan may include
upgrades to existing facilities or changes in poultry husbandry practices, including
but not limited to changes in density or layout period.
iii. Entering into the PIP program precipitates the termination clause that requires a
ninety (90) day written notices as outlined in the Farm Bill Act. The PIP program
can last for a period of three (3) grow out cycles. The completion of the third
growout cycle of 90 days, a GROWER whose performances is better than average
will be removed from the PIP Program. GROWERS not showing a $0.0025 per
pound improvement in cost will be terminated.
VI. MISCELLANEOUS:
A. All disputes, claims, and questions regarding the rights and obligations of the parties
under the terms of this AGREEMENT shall be subject to compulsory arbitration. Either
party may make a demand for arbitration by filling such demand in writhing with the
other party within forty-five (45) days after the disputes first arises. Thereafter,
arbitration shall be conducted by one arbitrator acting under the rules of commercial
arbitration of the American Arbitration Association. The decision of the arbitrator shall
be final and binding upon both parties hereto. Each party shall share equally the
arbitrator’s expenses.
B. As outlined in the Farm Bill Act, GROWER has the right, before entering into the
AGREEMENT, to decline the requirement to use arbitration to resolve any controversy
that may arise hereunder. If GROWER declines the requirement to use arbitration,
GROWER has the right to nonetheless seek to resolve any controversy that may arise
under this AGREEMENT if, after the controversy arises, both parties consent in writing
to use arbitration to settle the controversy. GROWERS refusing the arbitration process
are required to sign a statement to that affect.
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By signing below, GROWER declines the requirement to use arbitration to resolve any
controversy that may arise hereunder.
_____________________________ _______________________________(seal)
WITNESS GROWER (CO-OWNER)
_____________________________ _______________________________(seal)
WITNESS GROWER (CO-OWNER)
_____________________________
DATE
C. If any legal action is filed for the enforcement or interpretation of this AGREEMENT,
the prevailing party shall be entitled to recover, as a part of its damages, the costs,
including reasonable attorney’s fees, incurred by prevailing party.
D. The invalidity of any portion of this AGREEMENT shall not affect the validity of any
other provision. If any provision of this AGREEMENT is held to be invalid, the
remaining provisions shall be deemed to be in full invalid provision.
E. This AGREEMENT and the then current COMPENSATION SCHEDULE constitutes the
entire agreement between __________, __________ and GROWER, and no
representations statements made by either party or their agents not contained herein shall
be in any way binding on either party. This AGREEMENT shall be freely assignable by
GROWER only with _________, _______ prior written consent.
F. This AGREEMENTS shall be governed by, and construed and enforced in accordance
with the laws of the state where GROWER’S premises are located and operations
conducted under this AGREEMENT.
G. This AGREEMENT shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto, and shall supersede any previous
AGREEMESNT made between the said parties.
H. By executing this AGREEMENT and COMPENSATION SCHEDULE, GROWER
represents and warrants that he ,she or it has been afforded the opportunity to have the
AGREEMENT and COMPENSETION SCHEDULE reviewed outside the business
premises of ___________, ___________ or __________, ____________ agents by an
attorney or adviser of GROWER’S choosing for at least three business days prior to such
execution.
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___________, _________
GROWER COMPENSATION SCHEDULE
I. WEEK’S AVERAGE PRIME COST
The sum of chick, feed, fuel, and non-chargeable expenses (including but not limited to;
litter, litter bug treatment, PLT, vaccine, medication, and miscellaneous costs) as charged to
each program’s Settling GROWERS, divided by the total Pounds of Poultry Moved from
Settling GROWERS’ farms as recorded by the far, weight record. These costs shall be
calculated using standard rates as determined by __________, ______.
II. WEEK’S AVERAGE ADJUSTED PRIME COST
The Week’s Starting Adjusted Prime Cost is the sum of chick, feed and fuel costs of all
Settling Growers divided by the pounds of poultry moved from each program’s Settling
GROWER’s farms as recorded by the farm weight record. These costs shall be calculated
using standards rates as determined by ____________, _________.
a. A minimum of 5 flocks are required to calculate the Week’s Starting Average
Adjusted Prime Cost. In the event there are not 5 flocks within the Payment
Period, the number of flocks to equal or exceed 5 will be used from the previous
week’s Payment Period starting with the most recent flocks moved.
b. All GROWERS who’s Adjusted Prime Cost per pound is $.0150 greater than the
Week’s Starting Average Adjust Prime Cost shall be excluded when calculating
the Week’s Final Average Adjusted Prime Cost.
III. GROWER ADJUSTED PRIME COST
The Adjusted Prime Cost is sum of chick, feed and fuel costs divided by the pounds of
poultry moved from GROWER’S farm as recorded by the farm weight record. These costs
shall be calculated using standards rates as determined by ___________, ________.
IV. GROWER’S POINT SPREAD
Week’s Average Adjusted Prime Cost minus GROWER’s Adjusted Prime Cost.
V. PAYMENT PERIOD
Based on final movement, all flocks marketed each week from Saturday at midnights to the
following Saturday at midnight will constitute a payment period.
VI. BASE PAYMENT RATES
Payments rates per pound of poultry moved by program:
Program ABF SB SB ABF SR SR
Base Pay Rate per Pound $0.0510 $0.0370 $0.0490 $0.0335
VII. GROWER PERFORMANCE PAYMENT
The GROWER’S Performance Payment per pound is the base payment per pound plus or
minus the GROWER’S Point Spread.
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VIII. INCENTIVE PAYMENTS
All the below listed Incentive Payments will be paid per live pound. The applicable
Incentive Pays will be added to the GROWER Performance Payment (Base Pay +Point
Spread). If a farm has a combination of different types of housing, the incentive pay per
pound will be pro-rated based on the percent of square footage of each style house placed.
Example: A farm has a combination of “tunnel” housing. House #1 has a 6”
recirculating system and house #2 is conventional. The square Footage for house #1 is
20,000 and house #2 is 16,000. Total farm square footage of 36,000 square feet.
20,000 square feet of tunnel divided by 36,000 total square feet = 56%
tunnel.
56% X $0.0055 (Tunnel Incentive) = $.0031 per pound of all poultry moved.
A. Tunnel Incentive Pay - Houses which meet __________, _________ tunnel specifications
and approved air will receive the Tunnel Incentive Pay per pound.
ABF SB SB ABF SR SR
Tunnel Incentive Rate per Pound - 6" Recirculation Pad $0.0055 $0.0055 $0.0055 $0.0055
Tunnel Incentive Rate per Pound - Spray on Pad $0.0035 $0.0035 $0.0035 $0.0035
B. Solid Sidewall Incentive Pay – This incentive pay will be paid to those houses with both
sides covered and sealed properly and insulated to a minimum rating of R-13.
ABF SB SB ABF SR SR
Both sides covered, sealed properly and insulated to a minimum of R-13 $0.0035 $0.0035 $0.0035 $0.0035
C. Brooding Light Circuit Incentive Pay – This incentive pay will be paid to those houses
that contain a brooding light circuit and are able to achieve 2.5 or greater foot candles.
ABF SB SB ABF SR SR
Brooding Light Circuit 2.5 or greater Foot Candles $0.0015 $0.0015 $0.0015 $0.0015
D. Pulse Water Meter Incentive Pay – This incentive pay will be paid to those houses that
are equipped with a pulse water meter connected through the controller. There must be
one pulse water meter per house.
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ABF SB SB ABF SR SR
Pulse water meter connected through the controller $0.0010 $0.0010 $0.0010 $0.0010
IX. CHANGE OF PRGORAM INCENTIVE PAY
a. The below rates per pound will paid when the program change involved all of the houses
within an account.
ABF SB SB ABF SR SR
SB or ABF SB placed but proceeded as SR or ABF SR NA NA $0.0025 $0.0025
SR or ABF SR placed but processed as SB or ABF SB $0.0120 $0.0120 NA NA
b. If there is a partial farm movement change (i.e. less than all of the houses change
programs) the GROWER will be paid based on the average pay per day of the flocks used
to create the best five of six flock average. The per day pay amount will be multiplied
times the average of the flock for total pay amount prior to bonuses.
X. CONTRACT MINIMUM PAY
Contract Minimum Pay will be paid per square foot of housing space per flock. Contract
Minimum Pay will be paid instead if it exceeds the total of the Grower’s Performance
Payments plus Incentives.
ABF SB SB ABF SR SR
Standard House $0.25/Sq. Ft $0.25/Sq. Ft $0.25/Sq. Ft $0.25/Sq. Ft
New House $0.33/Sq. Ft $0.33/Sq. Ft $0.33/Sq. Ft $0.33/Sq. Ft
XI. GROWER’s SIX - FLOCK ADJUSTED PRIME COST RATING
A simple average of GROWER’S Point Spread for the previous up to six (6) flocks settled.
If this is the GROWER’S first flock, the rating shall zero.
XII. FIVE OF SIX FLOCKS AVERAGE RATING BONUS
a. Five of Six Flocks Average Rating is the simple average pf GROWER’S highest five out
of the last six settled flocks’ GROWER’S Point Spread. For growers with less than six
flocks settled, but greater than two, the Five of Six Flocks Average Rating is a sample
average of those flocks GROWER’S Point Spreads. If a grower has less than three flocks
settled, the Five of Six Flocks Average Rating shall be zero.
b. In order to receive the Five of Six Flocks Average Rating Bonus, a GROWER must have
a Five of Six Flock’s Average Rating greater than zero. The GROWER will receive 50%
of the Five of Six Flocks Average Rating
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For example: If the GROWER’S 5 of 6 flock average, prior to current settlement, is +.0020,
then +.0010 will be added to their payment per pound.
XIII. ELECTRIC BONUS
An electric bonus will be paid pound of poultry moved between June 1 and October 31.
ABF SB SB ABF SR SR
Electric Bonus $0.0025 $0.0025 $0.0050 $0.0050
XIV. DIASTER PAYMENT:
a. In the event of a disaster involving 100% loss of a flock from fire, windstorm, flood or
hail ______, ______will pay GROWER $10.00 per week per one-thousand (1000) chicks
placed and lost from date of placement of birds on GROWER’S farm to the date of
disaster.
b. In the event of a partial disaster (less than 100%) of a flock from fire, windstorm, flood or
hail, placed and lost from date of placement of birds on GROWER’s farm to the date the
disaster. The surviving poultry will be settled in accordance to the COMPENSATION
SCHEDULE and all surviving house Contract Minimum Payments will apply:
c. In the event there is an excessive amount of birds lost (greater than 2% of the birds
placed) during a 24-hour period, the following will apply:
i. If birds lost are due to malfunction of the GROWER’s equipment (alarms, fans,
curtain minders generators, electrical boxes, etc.) that was preventable and within
the control of the GROWER, or caretaker not being present to respond to an
emergency situation, then all Contract Minimum Pay and Disaster Payments will
not apply.
ii. If birds lost are due to malfunction of the GROWER’S equipment (alarms, fans,
curtain minders generators, electrical boxes, etc.) that was not preventable and not
within the control of the GROWER, _________, _________ will pay GROWER
$10.00 per week per one-thousand (1000) chicks placed and lost from date of
placement of birds on GROWER’S farm to the date of the disaster. The surviving
poultry will be settled in accordance to the Compensation Schedule and all
surviving house Contract Minimum Payments will apply.
IN WITNESS WHERORF, the parties have hereunto set their hands and seals to this
AGREEMENT and COMPENSATION SCHEDULE on the day and year first above written.
__________, _________
By ______________________________ (seal)
Director of Live Production
_____________________________ _______________________________(seal)
WITNESS GROWER (CO-OWNER)
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_____________________________ _______________________________(seal)
WITNESS GROWER (CO-OWNER)
_____________________________
DATE
Final Study for the Study on Poultry Catastrophic Disease
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Appendix B
Stakeholder Input
Exhibit 1. Listening Session Agenda
Exhibit 2. Sample Listening Session Press Release
Final Study for the Study on Poultry Catastrophic Disease
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Exhibit 1
Listening Session Agenda
Final Study for the Study on Poultry Catastrophic Disease
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Poultry Catastrophic Disease Study – FCIC Insurance? Listening Session Agenda
Introductions
Watts and Associates, Inc. RMA representative Congressional representatives Other attendees
Purpose Gather stakeholder input regarding possible Federal poultry
catastrophic disease product
Background Paperwork Reduction Act constraints Farm Bill mandate Contract requirements
• Criteria for Feasibility Contract definition of Poultry Catastrophic Disease Typical process for development of a crop insurance product
Stakeholder Input Catastrophic events for a contract grower Catastrophic events for a poultry owner Experiences with poultry catastrophic disease Interest in poultry catastrophic disease crop insurance
• Existing private products • Possible FCIC coverage
How growers and owners protect themselves from the risks of poultry catastrophic disease
• Veterinary care • National Poultry Improvement Plan • Other bio-security measures
Other issues raised by the attendees
Questions
Final Study for the Study on Poultry Catastrophic Disease
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Exhibit 2
Sample Listening Session Press Release
Final Study for the Study on Poultry Catastrophic Disease
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Government Contractor Seeks Stakeholder Input on Federal Insurance for
Poultry Catastrophic Disease Events.
Congress made an amendment to Section 522(c) of the Federal Crop Insurance Act in the
Agricultural Act of 2014. One portion of the amendment added a subparagraph to the Crop
Insurance Act directing the Federal Crop Insurance Corporation (FCIC) to contract for “a study
to determine the feasibility of insuring poultry producers for a catastrophic event.”
Watts and Associates, Inc. (W&A) was awarded the contract to conduct this study. W&A is an
economic consulting firm out of Billings, Montana and has completed almost 100 projects
focused on crop insurance in the United States, Canada, and Europe over the last 12 years. The
completed projects include a 2010 report entitled “Feasibility Research Report for Insuring
Commercial Poultry Production” prepared for the United Sates Department of Agriculture
(USDA) Risk Management Agency (RMA). Part of the research required under the Poultry
Catastrophic Disease Study is gathering stakeholder input. To that end, W&A is conducting
listening sessions open to the public on Date, 2015, at Time am/pm at Location, Minnesota; on
Date, 2015, at Time am/pm at Location, Pennsylvania; and on Date, 2015, at Time am/pm at
Location, California.
W&A is particularly interested in gathering information on the level of concern associated with
catastrophic diseases in the poultry industry; risk management techniques related to such
diseases; insurable interest (share of risk) held by integrators and growers; impressions about the
current government programs to assist with the costs associated with depopulation, cleaning,
disinfection, and heightened surveillance procedures; and other relevant feedback. If you are
unable to attend a listening session, you can provide your input to Randy Landgren at W&A by
email at [email protected]. You may also indicate your interest in attending
one of the sessions at the same email address.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Appendix C
State Veterinarians
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C1
STATE ANIMAL HEALTH OFFICIALS –2014 ALABAMA
Name: Dr. Anthony G. Frazier
Title: State Veterinarian
Agency: Animal Industry Division
Department: Alabama Department of Agriculture and
Industries
Office Address: 1445 Federal Drive
Montgomery, AL 36107
Office Telephone No: (334) 240-7255
Fax No: (334) 240-7198
E-mail : [email protected]
ALASKA
Name: Dr. Robert Gerlach
Title: State Veterinarian
Department: Department of Conservation and
Environmental Health
Office Address: 5251 Dr. Martin Luther King Jr.
Ave.
Anchorage, AK 99507
Office Telephone No: (907) 375-8215
Fax No: (907) 929-7335
E-mail : [email protected]
ARIZONA
Name: Dr. Perry Durham
Title: State Veterinarian
Department: Arizona Department of Agriculture
Office Address: 1688 West Adams Street
Phoenix, AZ 85007
Office Telephone No: (602) 542-4293
Fax No: (602) 542-4290
E-mail : [email protected] 12/9/2014
ARKANSAS
Name: Dr. George Badley
Title: State Veterinarian
Department: Arkansas Livestock & Poultry
Commission
Mailing Address: P.O. Box 8505
Little Rock, AR 72215
Office Address: #1 Natural Resources Drive
Little Rock, AR 72205
Office Telephone No: (501) 907-2400
Fax No: (501) 907-2425
E-mail : [email protected]
CALIFORNIA
Name: Dr. Annette Jones
Title: State Veterinarian and Director
Agency: California Department of Food and
Agriculture
Department: Animal Health and Food Safety
Services
Mailing Address: 1220 N Street
Sacramento, CA 95814
Office Address: 2800 Gateway Oaks
Sacramento, CA 95814
Permit No: (916) 900-5002
Website: http://www.cdfa.ca.gov/ahfss/
Permits Info: Most livestock and poultry have entry
permit and Certificate of Veterinary Inspection
(CVI) requirements to enter California. California
entry permits are issued to accredited licensed
veterinarians from the state of origin by the Animal
Health Branch.
Office Telephone No: (916) 900-5000
Fax No: (916) 900-5332
E-mail : [email protected] 12/9/2014
COLORADO
Name: Dr. Keith Roehr
Title: State Veterinarian
Agency: Animal Health Division
Department: Colorado Department of Agriculture
Office Address: 305 Interlocken Parkway
Broomfield, CO 80021
Animal Import Requirement:
http://www.colorado.gov/cs/Satellite/Agriculture-
Main/CDAG/1183672504470
CDA Animal Industry Division:
http://www.colorado.gov/cs/Satellite/Agriculture-
Main/CDAG/1167928197091
Office Telephone No: (303) 869-9130
Fax No: (303) 466-8515
E-mail : [email protected]
CONNECTICUT
Name: Dr. Mary Jane Lis
Title: State Veterinarian
Agency: Bureau of Regulation and Inspection
Department: Connecticut Department of Agriculture
Office Address: 165 Capitol Avenue, Room G-8A
Hartford, CT 06106
Import: (860)713-2504 (Livestock)
(860)713-2508 (Poultry)
Website: www.ct.gov.doag
Office Telephone No: (860) 713-2505
Fax No: (860) 713-2548
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C2
DELAWARE
Name: Dr. Heather Hirst
Title: State Veterinarian
Department: Delaware Department of Agriculture
Office Address: 2320 S. DuPont Highway
Dover, DE 19901
Office Telephone No: (302) 698-4500
Fax No: (302) 697-4451
E-mail : [email protected] 4 12/9/2014
DISTRICT OF COLUMBIA
Name: Dr. Vito DelVento
Title: Executive Director
Agency: Heath Regulation and Licensing
Administration
Department: District of Columbia Department of
Health
Office Address: 899 North Capitol St. NE, 2nd Floor
Washington, DC 20002
Office Telephone No: (202) 724-8813
Fax No: (202) 724-8977
E-mail : [email protected]
FLORIDA
Name: Dr. Michael Short
Title: State Veterinarian and
Director of Animal Industry
Agency: Division of Animal Industry
Department: Florida Department of Agriculture and
Consumer Services
Office Address: 335 Mayo Bldg., 407 South Calhoun
Street
Tallahassee, FL 32399-0800
Office Telephone No: (850) 410-0900
Fax No: (850) 410-0915
E-mail : [email protected]
GEORGIA
Name: Dr. Robert Cobb
Title: State Veterinarian
Agency: Animal Industry Division
Department: Georgia Department of Agriculture
Office Address: 19 Martin Luther King Jr. Dr., SW
Atlanta, GA 30334-4201
Office Telephone No: (404) 656-3671
Fax No: (404) 657-1357
E-mail: [email protected]
HAWAII
Name: Dr. Isaac Maeda
Title: Acting Administrator5 12/9/2014
Agency: Animal Industry Division
Department: State of Hawaii Department of
Agriculture
Office Address: 99-941 Halawa Valley St.
Aiea, HI 96701
Office Telephone No: (808) 483-7100
Fax Number: (808) 483-7110
E-mail : [email protected]
IDAHO
Name: Dr. Bill Barton
Title: State Veterinarian/Administrator
Agency: Division of Animal Industries
Department: Idaho State Department of Agriculture
Mailing Address: P.O. Box 7249
Boise, ID 83707
Office Address: 2270 Old Penitentiary Rd
Boise, ID 83712
Office Telephone No: (208) 332-8540
Fax No: (208) 334-4062
E-mail : [email protected]
ILLINOIS
Name: Dr. Mark Ernst
Title: State Veterinarian
Agency: Bureau of Animal Health and Welfare
Department: Illinois Department of Agriculture
Mailing Address: P.O. Box 19281
Springfield, IL 62794-9281
Office Address: 801 E. Sangamon Ave., State
Fairgrounds
Springfield, IL 62794-9281
Office Telephone No: (217) 782-4944
Fax No: (217) 558-6033
E-mail : [email protected]
INDIANA
Name: Dr. Bret D. Marsh
Title: State Veterinarian
Department: Indiana Board of Animal Health
Office Address: Discovery Hall, Suite 100
1202 East 38th Street
Indianapolis, IN 46205
Office Telephone No: (317) 544-2400
Fax No: (317) 974-2011
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C3
IOWA
Name: Dr. David D. Schmitt
Title: State Veterinarian
Agency: Animal Industry Bureau
Department: Agriculture and Land Stewardship
Office Address: 502 East 9th Street
Des Moines, IA 50319
Permit: (515)281-5547
Website :
http://www.iowa.agriculture.gov/animalindustry.as
p
Office Telephone No: (515) 281-5305
Fax No: (515) 281-4282
E-mail : [email protected]
KANSAS
Name: Dr. William L. Brown
Title: Animal Health Commissioner
Agency: Division of Animal Health
Department: Kansas Department of Agriculture
Office Address: 1320 Research Park Drive
Manhattan, KS 66502
Permit : (785) 564-6616
Website : agriculture.ks.gov/animalhealth
Office Telephone No: (785) 564-6601
Fax No: (785) 564-6777
E-mail : [email protected]
KENTUCKY
Name: Dr. Robert Stout
Title: State Veterinarian7 12/9/2014
Agency: Division of Animal Health
Department: Kentucky Department of Agriculture
Office Address: 109 Corporate Drive
Frankfort, KY 40601
Office Telephone No: (502) 573-0282
Fax No: (502) 573-1020
Email: [email protected]
LOUISIANA
Name: Dr. Brent Robbins
Title: State Veterinarian
Agency: Animal Health and Food Safety
Department: Louisiana Department of Agriculture
and Forestry
Mailing Address: P.O. Box 1951
Baton Rouge, LA 70821
Office Address: 5825 Florida Boulevard, Rm 1262
Baton Rouge, LA 70806
Office Telephone No: (225) 925-3962
Fax No: (225) 237-5555
E-mail : [email protected]
MAINE
Name: Dr. Michele Walsh
Title: State Veterinarian
Agency: Division of Animal Industry
Department: Maine Department of Agriculture
Office Address: State House, Station 28
Augusta, ME 04333-0028
Office Telephone No: (207) 287-7615
Fax No: (207) 624-5040
E-mail : [email protected]
MARYLAND
Name: Dr. N. Jo Chapman
Title: Acting State Veterinarian and Assistant Chief
of Animal Health
Agency: Animal Health Program
Department: Maryland Department of Agriculture
Office Address: 50 Harry S. Truman Parkway8
12/9/2014
Annapolis, MD 21401
Office Telephone No: (410) 841-5810
Fax No: (410) 841-5999
E-mail : [email protected]
MASSACHUSETTS
Name: Dr. Lorraine O’Connor
Title: State Veterinarian
Agency: Division of Animal Health
Department: Department of Agricultural Resources
Office Address: 251 Causeway St., Suite 500
Boston, MA 02114-2151
Permit : (617)626-1810
Website : www.mass.gov/agi
Office Telephone No: (617) 626-1795
Fax No: (617) 626-1850
E-mail : lorraine.o’[email protected]
MICHIGAN
Name: Dr. James Averill
Title: State Veterinarian
Department: Michigan Department of Agriculture
and Rural Development
Mailing Address: P.O. Box 30017
Lansing, MI 48909
Office Address: 525 W. Allegan
Lansing, MI 48933
Office Telephone No: (800) 292-3939
Fax No: (517) 373-6015
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C4
MINNESOTA
Name: Dr. William L. Hartmann
Title: Executive Director and State Veterinarian
Department: Minnesota Board of Animal Health
Office Address: 625 North Robert St.
St. Paul, MN 551559 12/9/2014
Permit : (651)296-2942
Website : www.mn.gov/bah
Office Telephone No: (651) 296-2942
Fax No: (651) 296-7417
E-mail: [email protected]
MISSISSIPPI
Name: Dr. James A. Watson
Title: State Veterinarian
Agency: Board of Animal Health
Department: Mississippi Department of Animal
Health
Mailing Address: P.O. Box 3889
Jackson, MS 39207
Office Address: 121 N. Jefferson St.
Jackson, MS 39201
Office Telephone No: (601) 359-1170
Fax No: (601) 359-1177
E-mail : [email protected]
MISSOURI
Name: Dr. Linda Hickam
Title: State Veterinarian
Agency: Animal Health Division
Department: Missouri Department of Agriculture
Mailing Address: P.O. Box 630
Jefferson City, MO 65102-0630
Office Address: 1616 Missouri Blvd.
Jefferson City, MO 65109
Office Telephone No: (573) 751-3377
Fax No: (573) 751-6919
E-mail : [email protected]
MONTANA
Name: Dr. Martin Zaluski
Title: State Veterinarian
Agency: Animal Health Division
Department: Montana Department of Livestock
Mailing Address: P.O. Box 202001
Helena, MT 59620-2001
Office Address: 301 N. Roberts10 12/9/2014
Montana, MT 59620-2001
Permit : (406)444-2976
Website : www.liv.mt.gov
Office Telephone No: (406) 444-2043
Fax No: (406) 444-1929
E-mail : [email protected]
NEBRASKA
Name: Dr. Dennis A. Hughes
Title: State Veterinarian
Agency: Animal and Plant Health Protection
Department: Nebraska Department of Agriculture
Mailing Address: P.O. Box 94787
Lincoln, NE 68509-4787
Office Address: 301 Centennial Mall South
Lincoln, NE 68509-4787
Website : www.agr.ne.gov/animal/index.html
Office Telephone No: (402) 471-2351
Fax No: (402) 471-6893
E-mail : [email protected]
NEVADA
Name: Dr. Michael Greenlee
Title: State Veterinarian
Agency: Division of Animal Industry
Department: Nevada Department of Agriculture
Office Address: 405 South 21st St.
Sparks, NV 89431
Permit: (775)353-3718
Website: http://agri.nv.gov
Office Telephone No: (775) 353-3755
Fax No: (775) 353-3659
E-mail: [email protected]
NEW HAMPSHIRE
Name: Dr. Stephen K. Crawford
Title: State Veterinarian
Agency: Markets and Food Division of Animal
Industry
Department: New Hampshire Department of
Agriculture
Mailing Address: P.O. Box 204211 12/9/2014
Concord, NH 03302-2042
Office Address: State House Annex, 2nd Floor
25 Capitol St.
Concord, NH 03229
Office Telephone No: (603) 271-2404
Fax No: (603) 271-1109
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C5
NEW JERSEY
Name: Dr. Manoel Tamassia
Title: State Veterinarian and
Director of Division of Animal Health
Agency: Division of Animal Health
Department: New Jersey Department of Agriculture
Mailing Address: P.O. Box 330
Trenton, NJ 08625-0330
Office Address: 3 Schwarzkopf Dr.
Ewing, NJ 08628
Permits: (609) 671-6400
Office Telephone No: (609) 671-6400
Fax No: (609) 671-6413
E-mail : [email protected]
NEW MEXICO
Name: Dr. Ellen Mary Wilson
Title: State Veterinarian
Department: New Mexico Livestock Board
Office Address: 300 San Mateo Boulevard NE
Suite 1000
Albuquerque, NM 87108
Website : www.nmlbonline.com
Office Telephone No: (505) 841-6161
Fax No: (505) 841-6160
E-mail : [email protected]
NEW YORK
Name: Dr. David Smith
Title: State Veterinarian and
Director, Division of Animal Industry
Agency: Division of Animal Industry12 12/9/2014
Department: New York State Department of
Agriculture and
Markets
Office Address: 10 B Airline Drive
Albany, NY 12235
Office Telephone No: (518) 457-3502
Fax No: (518) 485-7773
E-mail : [email protected]
NORTH CAROLINA
Name: Dr. R. Douglas Meckes
Title: State Veterinarian
Agency: Veterinary Division
Department: North Carolina Department of
Agriculture and
Consumer Services
Mailing Address: 1030 Mail Service Center
Raleigh, NC 27699-1030
Office Address: Rm. 566, Agriculture Bldg.
2 West Edenton Street
Raleigh, NC 27601
Website : http://www.ncagr.gov/vet/
Office Telephone No: (919) 733-7601
Fax No: (919) 733-2277
E-mail : [email protected]
NORTH DAKOTA
Name: Dr. Susan J. Keller
Title: State Veterinarian
Agency: State Board of Animal Health
Department: North Dakota Department of
Agriculture
Office Address: 600 E. Boulevard Ave., Dept. 602
Bismarck, ND 58505
Website : http://www.nd.gov/ndda/program/animal-
importation-requirements
Office Telephone No: (701) 328-2657
Fax No: (701) 328-4567
E-mail : [email protected]
OHIO
Name: Dr. Tony Forshey
Title: State Veterinarian
Agency: Division of Animal Health
Department: Ohio Department of Agriculture13
12/9/2014
Office Address: 8995 E. Main St.
Reynoldsburg, OH 43068
Permit : (614)728-6220
Website : http://www.agri.ohio.gov/
Office Telephone No: (614) 728-6220
Fax No: (614) 728-6310
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C6
OKLAHOMA
Name: Dr. Rod Hall
Title: State Veterinarian
Agency: Oklahoma Department of Agriculture, Food
and Forestry
Department: Animal Industry Division
Office Address: 2800 N. Lincoln Blvd.
Oklahoma City, OK 73152
Mailing Address: P.O. Box 528804
Oklahoma City, OK 73152
Permit : (405)522-6141
Website : http://www.oda.state.ok.us/ais/oair.pdf
Office Telephone No: (405) 522-6141
Fax No: (405) 522-0756
E-mail : [email protected]
OREGON
Name: Dr. Brad LeaMaster
Title: State Veterinarian
Agency: Animal and Identification Division
Department: Oregon Department of Agriculture
Office Address: 635 Capitol St., NE
Salem, OR 97301-2532
Office Telephone No: (503) 986-4680
Fax No: (503) 986-4734
E-mail : [email protected]
PENNSYLVANIA
Name: Dr. Craig Shultz
Title: State Veterinarian and Director
Agency: Bureau of Animal Health and Diagnostic
Services14 12/9/2014
Department: Pennsylvania Department of Agriculture
Office Address: 2301 N. Cameron St.
Harrisburg, PA 17110-9408
Office Telephone No: (717) 772-2852
Fax No: (717) 787-1868
E-mail : [email protected]
RHODE ISLAND
Name: Dr. Scott Marshall
Title: State Veterinarian
Agency: Rhode Island Division of Agriculture
Department: Department of Environmental
Management
Office Address: 235 Promenade Street, Rm. 370
Providence, RI 02908
Office Telephone No: (401) 222-2781
Fax No: (401) 222-6047
Email : [email protected]
SOUTH CAROLINA
Name: Dr. Boyd Parr
Title: State Veterinarian
Agency: Clemson Livestock Poultry Health Programs
Department: Clemson University
Mailing Address: Box 102406
Columbia, SC 29224-2406
Office Address: 500 Clemson Rd.
Columbia, SC 29229
Office Telephone No: (803) 788-2260
Fax No: (803) 788-8058
E-mail: [email protected]
SOUTH DAKOTA
Name: Dr. Dustin Oedekoven
Title: State Veterinarian
Department: South Dakota Animal Industry Board
Office Address: 411 S. Fort St. 15 12/9/2014
Pierre, SD 57501
Office Telephone No: (605) 773-3321
Fax No: (605) 773-5459
E-mail : [email protected]
TENNESSEE
Name: Dr. Charles Hatcher
Title: State Veterinarian
Agency: Division of Regulatory Services
Department: Tennessee Department of Agriculture
Office Address: P.O. Box 40627
Nashville, TN 37204
Office Telephone No: (615) 837-5120
Fax No: (615) 837-5250
E-mail : [email protected]
TEXAS
Name: Dr. Dee Ellis
Title: State Veterinarian and
Executive Director
Department: Texas Animal Health Commission
Mailing Address: P.O. Box 12966
Austin, TX 78711
Office Address: 2105 Kramer Lane
Austin, TX 78758
Permit: (512)719-0777
Website: http://www.tahc.texas.gov
Office Telephone No: (512) 719-0704
Fax No: (512) 719-0719
E-mail: [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C7
UTAH
Name: Dr. Warren Hess
Title: Acting State Veterinarian
Agency: Division of Animal Industry
Department: Utah Department of Agriculture
Mailing Address: P.O. Box 146500
Salt Lake City, UT 84114-6500
Office Address: 350 North Redwood Rd.16
12/9/2014
Salt Lake City, UT 84114-6500
Permit: (801)538-7164
Website: www.ag.utah.gov
Office Telephone No: (801) 538-7161
Fax No: (801) 538-7169
E-mail: [email protected]
VERMONT
Name: Dr. Kristin M. Haas
Title: State Veterinarian
Agency: Agriculture, Food and Markets
Department: Division of Food Safety and Consumer
Protection
Office Address: 116 State St.
Montpelier, VT 05602-2901
Website: www.agriculture.vermont.gov
Office Telephone No: (802) 828-2426
Fax No: (802) 828-5983
E-mail : [email protected]
VIRGIN ISLANDS
Name : Dr. Bethany Bradford
Title : Director of Veterinary Services
Agency : Division of Veterinary Services
Department : Virgin Islands Department of
Agriculture
Mailing Address : RR1 Box 10345
Kingshill, VI 00850
Office Address : Estate Lower Love, St. Croix, VI
Office Telephone : 340-778-0998/0997/0991 ext 241
or 252
Fax No : 340-779-3100/778-7977/774-1823
E-mail : [email protected]
VIRGINIA
Name: Dr. Richard L. Wilkes
Title: State Veterinarian
Agency: Division of Animal and Food Industry
Services
Department: Virginia Department of Agriculture and
Consumer Services
Mailing Address: P.O. Box 1163
Richmond, VA 23218
Office Address: Oliver W. Hill Building, Rm. 165
102 Governor St.
Richmond, VA 2321917 12/9/2014
Office Telephone No: (804) 692-0601
Fax No: (804) 371-2380
E-mail : [email protected]
WASHINGTON
Name: Dr. Joe B. Baker
Title: State Veterinarian
Agency: Animal Services Division
Department: Washington State Department of
Agriculture
Mailing Address: P.O. Box 42560
Olympia, WA 98504-2577
Office Address: 1111 Washington Street SE
Olympia, WA 98504-2560
Permit : (360)902-1878
Website : www.agr.wa.gov
Office Telephone No: (360) 902-1878
Fax No: (360) 902-2087
E-mail : [email protected]
WEST VIRGINIA
Name: Dr. Jewell Plumley
Title: State Veterinarian/Director Animal Health
Agency: Animal Health Division
Department: West Virginia Department of
Agriculture
Office Address: 60B Moorefield Industrial Park Rd
Moorefield, WV 26836
Office Telephone No: (304) 538-2397 or
(304) 558-2214
Fax No: (304) 538-8133
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
C8
WISCONSIN
Name: Dr. Paul J. McGraw
Title: State Veterinarian and
Administrator of the Division of Animal Health
Agency: Division of Animal Health
Department: Agriculture, Trade and Consumer
Protection
Mailing Address: P.O. Box 8911
Madison, WI 53708-8911
Office Address: 2811 Agriculture Dr.
Madison, WI 53708-8911
Import : (608) 224-4874 (business hours only)
(608) 224-4879 (automated – 24 hrs/day)18
12/9/2014
Website : http://datcp.wisconsin.gov
Animal Movement:
http://datcp.wi.gov/Animals/Animal_Movement/in
dex.aspx
Office Telephone No: (608) 224-4872
Fax No: (608) 224-4871
E-mail : [email protected]
WYOMING
Name: Dr. Jim Logan
Title: State Veterinarian
Department: Wyoming Livestock Board
Office Address: 610 Fairgrounds Rd.
Riverton, WY 82501
Main Office: 1934 Wyott Dr.
Cheyenne, WY 82002
Permit No: (307)777-7515
Website: http://wlsb.state.wy.us/
Office Telephone No: (307) 857-4140
Fax No: (307) 857-6380
E-mail : [email protected]
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Appendix D
APHIS Stakeholder Registry Reports
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
D1
WASHINGTON, April 14, 2015 -- The United States Department of Agriculture’s (USDA)
Animal and Plant Health Inspection Service (APHIS) has confirmed the presence of highly
pathogenic H5N2 avian influenza (HPAI) in an additional eight commercial turkey flocks in
Minnesota. There are 22 total confirmed cases in Minnesota. These flocks are within the
Mississippi flyway where this strain of avian influenza has previously been identified. CDC
considers the risk to people from these HPAI H5 infections in wild birds, backyard flocks and
commercial poultry, to be low. No human infections with the virus have been detected at this
time.
The affected flocks are in:
Kandiyohi County – 30,000 turkeys (4th detection in the county)
La Sueur County – 21,500 turkeys (1st detection in the county)
Meeker County – 25,000 turkeys (2nd detection in the county)
Meeker County – 20,000 turkeys (3rd detection in the county)
Stearns County – 76,000 turkeys (5th detection in the county)
Swift County – 160,000 turkeys (1st detection in the county)
Swift County – 154,000 turkeys (2nd detection in the county)
Redwood County – 56,000 turkeys (1st detection in the county)
Samples from the turkey flocks were tested at the University of Minnesota Veterinary Diagnostic
Laboratory and the APHIS National Veterinary Services Laboratories (NVSL) in Ames, Iowa
confirmed the findings. NVSL is the only internationally recognized AI reference laboratory in
the United States. APHIS is working closely with the Minnesota Board of Animal Health on a
joint incident response. State officials quarantined the premises and birds on the property will be
depopulated to prevent the spread of the disease. Birds from the flock will not enter the food
system.
The United States has the strongest AI surveillance program in the world. As part of the existing
USDA avian influenza response plans, Federal and State partners as well as industry are
responding quickly and decisively to these outbreaks by following these five basic steps: 1)
Quarantine – restricting movement of poultry and poultry-moving equipment into and out of the
control area; 2) Eradicate – humanely euthanizing the affected flock(s); 3) Monitor region –
testing wild and domestic birds in a broad area around the quarantine area; 4) Disinfect – kills
the virus in the affected flock locations; and 5) Test – confirming that the poultry farm is AI
virus-free. USDA also is working with its partners to actively look and test for the disease in
commercial poultry operations, live bird markets and in migratory wild bird populations.
The Minnesota Department of Health is working directly with poultry workers at the affected
facility to ensure that they are taking the proper precautions. As a reminder, the proper handling
and cooking of poultry and eggs to an internal temperature of 165 ˚F kills bacteria and viruses.
USDA will include the confirmation information in routine updates to the World Organization
for Animal Health (OIE), and will notify international trading partners of this finding as
Final Study for the Study on Poultry Catastrophic Disease
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D2
appropriate. OIE trade guidelines call on countries to base trade restrictions on sound science
and, whenever possible, limit restrictions to those animals and animal products within a defined
region that pose a risk of spreading disease of concern.
These virus strains can travel in wild birds without them appearing sick. People should avoid
contact with sick/dead poultry or wildlife. If contact occurs, wash your hands with soap and
water and change clothing before having any contact with healthy domestic poultry and birds.
All bird owners, whether commercial producers or backyard enthusiasts, should continue to
practice good biosecurity, prevent contact between their birds and wild birds, and report sick
birds or unusual bird deaths to State/Federal officials, either through their state veterinarian or
through USDA’s toll-free number at 1-866-536-7593. Additional information on biosecurity for
backyard flocks can be found at http://healthybirds.aphis.usda.gov.
Additional background
Avian influenza (AI) is caused by an influenza type A virus which can infect poultry (such as
chickens, turkeys, pheasants, quail, domestic ducks, geese and guinea fowl) and is carried by free
flying waterfowl such as ducks, geese and shorebirds. AI viruses are classified by a combination
of two groups of proteins: hemagglutinin or “H” proteins, of which there are 16 (H1–H16), and
neuraminidase or “N” proteins, of which there are 9 (N1–N9). Many different combinations of
“H” and “N” proteins are possible. Each combination is considered a different subtype, and can
be further broken down into different strains. AI viruses are further classified by their
pathogenicity (low or high)— the ability of a particular virus strain to produce disease in
domestic chickens.
The HPAI H5N8 virus originated in Asia and spread rapidly along wild bird migratory pathways
during 2014, including the Pacific flyway. In the Pacific flyway, the HPAI H5N8 virus has
mixed with North American avian influenza viruses, creating new mixed-origin viruses. These
mixed-origin viruses contain the Asian-origin H5 part of the virus, which is highly pathogenic to
poultry. The N parts of these viruses came from North American low pathogenic avian influenza
viruses.
USDA has identified two mixed-origin viruses in the Pacific Flyway: the HPAI H5N2 virus and
new HPAI H5N1 virus. The new HPAI H5N1 virus is not the same virus as the HPAI H5N1
virus found in Asia, Europe and Africa that has caused some human illness. Only the HPAI
H5N2 virus has been detected in the Pacific, Mississippi and Central Flyways.
Detailed analysis of the virus is underway in cooperation with the U.S. Centers for Disease
Control and Prevention. For more information about the ongoing avian influenza disease
incidents visit the APHIS website. More information about avian influenza can be found on the
USDA avian influenza page. More information about avian influenza and public health is
available on the CDC website.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Attachments
Attachment I. Poultry-Grading Manual
Attachment II. United States Classes, Standards, and Grades for Poultry
AMS 70.200 et seq.
Attachment III. Egg-Grading Manual
Attachment IV. United States Standards, Grades, and Weight Classes for Shell
Eggs AMS 56
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Attachment I
Poultry-Grading Manual
USDA AMS provides poultry grading standards manuals on its Website
(http://www.ams.usda.gov/). For this report, the Poultry-Grading Manual from
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3002393 is incorporated into
the report by reference, with agreement of the Government.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Attachment II
United States Classes, Standards, and Grades for Poultry
AMS 70.200 et seq.
USDA AMS provides poultry grading standards manuals on its Website
(http://www.ams.usda.gov/). For this report, the United States Classes, Standards, and Grades
for Poultry AMS 70.200 et seq from
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004377 are incorporated
into the report by reference, with agreement of the Government.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Attachment III
Egg-Grading Manual
USDA AMS provides poultry grading standards manuals on its Website
(http://www.ams.usda.gov/). For this report, the Egg-Grading Manual from
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004502 is incorporated into
the report by reference, with agreement of the Government.
Final Study for the Study on Poultry Catastrophic Disease
Use or disclosure of information or data Risk Management Agency
contained on this sheet is subject to the Order No: D15PD00012 restrictions on the title page of this report.
Attachment IV
United States Standards, Grades, and Weight Classes for
Shell Eggs
AMS 56
USDA AMS provides poultry grading standards manuals on its Website
(http://www.ams.usda.gov/). For this report, the United States Standards, Grades, and Weight
Classes for Shell Eggs AMS 56 from
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004376 is incorporated into
the report by reference, with agreement of the Government.